The roots of the crisis extend back to 1952, when officers in the Egyptian army overthrew the monarchy under King Farouk. Abandoning policies which were co-operative with European powers, the new government desired to undertake a more nationalistic and assertive stance. This led to conflict with Israel and the European powers over the Suez Canal.
Throughout 1956, conflict increased between Israel and Egypt, with Israel launching frequent incursions into Egyptian territory and Egypt increasingly defending itself. Egypt, under the leadership of President Gamal Abdul Nasser, blockaded the Gulf of Aqaba and closed the Suez canal to Israeli shipping. At the same time, Egypt nationalized the canal, a vital trade route to the east, in which British banks and business held a 44% stake.
The British Prime Minister of the time Anthony Eden needed to persuade the British public of the need for war and so, perhaps in an attempt to recall World War II-era patriotism he compared Nasser's nationalization of the Suez Canal with the nationalism of Mussolini and Hitler 20 years earlier. Eden had been a staunch opponent of Neville Chamberlain's policy of appeasement and he claimed that a display of force was needed to prevent Nasser becoming another expansionist military threat, propagandising him as a sort of 'Mussolini of the Nile'.
In the months that followed Egypt's nationalization of the canal, a secret meeting between Israel, France and Britain took place at Sèvres, outside Paris. Details only emerged years later, as records of the meeting were suppressed and destroyed. All parties were agreed that Israel should invade and that Britain and France would subsequently intervene, instruct the Israeli and Egyptian armies to withdraw their forces either side of the canal, and then place an Anglo-French intervention force in the Canal Zone around Port Said. It was to be called "Operation Musketeer".
On October 29, Israel invaded the Gaza Strip and the Sinai Peninsula and made rapid progress towards the canal zone. As per the agreement, Britain and France offered to reoccupy the area and separate the warring armies. Nasser (whose nationalisation of the company had been greeted with delirium by Egyptian crowds) refused the offer, which gave the European powers a pretext for a joint invasion to regain control of the canal and topple the Nasser regime. The United Kingdom and France then began to bomb Egypt on October 31 to force the reopening of the canal.
Alarmed by the crisis, on November 7, 1956, the United Nations General Assembly adopted a resolution which called for the United Kingdom, France and Israel to withdraw their troops from Egypt immediately.
The campaign progressed as planned at first, but the European forces never reached the canal itself. Although Israel captured the Gaza Strip in the course of the war, the whole episode is usually regarded in Britain as an embarrassment. Eden was forced to resign because of a combination of ill health and opposition from the Labour Party and even from within his own party over the invasion of Egypt.
The invading forces were forced to withdraw in March 1957 under pressure from the United States, which saw good relations with the third world as being more important than defending Anglo-French interests. Perhaps more significantly, the US also feared a wider war after the USSR's offer to intervene on the Egpytian side. After the withdrawal, the United Nations established the UN Emergency Force (UNEF) to keep peace in the area.
There were a few thousand casualties, mostly Egyptian, many civilian. In the course of the invasion it is claimed that the British stormed an Egyptian police station that held out under intense fire and killed almost all the policemen inside. There were claims of atrocities: it is reported that the French were seen machine-gunning to death peasants who had jumped into the canal in fear. There were also accusations of torture made against the British. Racism was a clear factor which allowed the invaders to justify their own inhumanity towards the Egyptian soldiers and civilians. The poorest area of Port Said, for example, was marked on British maps as "Wog-Town", it is said.
Part of the pressure that the United States used against Britain was financial, as Eisenhower threatened to sell the United States holdings of the British pound and thereby precipitate a collapse of the British currency.
Eden's resignation marked the end of the last attempt Britain would ever make to establish, as Scott Lucas writes, "that Britain did not require Washington's endorsement to defend her interests". In a way, it also marked the symbolic end of the British Empire, though it had in reality been in decline for decades, even before World War II. The crisis also marked the transfer of power to the new superpowers, the United States and the Soviet Union.
The crisis also greatly improved Nasser's standing in the Arab world and help to promote pan-Arabism. It also hastened the process of decolonization as the remaining colonies of both Britain and France become independent over the next several years.