Tension between the two African states rose sharply in January after Ethiopia rejected Egypt's demand it suspend construction of the Grand Ethiopian Renaissance Dam on the Blue Nile, the main tributary of the 4,130-mile river, the world's longest.
Egypt has vowed to protect its "historical rights" to the Nile "at any cost" and says it could lose 20 percent of its water if the giant dam in northwestern Ethiopia, one of several hydroelectric projects planned by Addis Ababa, is completed.
"It would be a disaster for Egypt," Mohamed Nasr Allam, a former Egyptian water minister, lamented to the Guardian daily of London in 2013. "Large areas of the country will simply be taken out of production."
Despite Cairo's tough declarations, and Addis Ababa's insistence on pressing ahead with the massive dam -- which it denies will damage Egypt to any critical extent -- there's little likelihood of the two states going to war, if only because the vast distance that separates them.
But the dispute is swelling into a major diplomatic wrangle in Africa that could have consequences on other continents as the planet faces water shortages in the decades ahead.
Ethiopia's Chinese-backed dam program will, if completed, produce abundant supplies of electricity that could transform the economies of the regional states long mired in poverty.
Egypt's position has been seriously weakened by the December defection of Sudan, its southern neighbor and longtime ally, in the Nile dispute with Ethiopia and other upstream African states.
That has left Egypt isolated in a long-running dispute with those states, which all want a greater share of the Nile water than they are accorded under British colonial era agreements that gave Egypt, and Sudan to a lesser extent, the lion's share of the river's flow.
Despite political turmoil in both Egypt and China-backed Ethiopia in recent months -- the July 2013 military coup in Cairo that ousted Egypt's first democratically elected president, and the 2012 death of longtime Ethiopian strongman Prime Minister Meles Zenawi -- both sides have dug in their heels over the Nile crisis.
Egypt, with 82 million people, is the most populous and the most militarized state of the 11 riverine states along the Nile, which rises in the highlands of Ethiopia.
But with Sudan now "so squarely in Ethiopia's camp, Egypt could not stage a ground attack on the dam," observed Hassen Hussein, a leader of Ethiopia's largest ethnic group, the Oromo, in an analysis on al-Jazeera Thursday.
An airstrike on the dam, 20 miles from Sudan's southern border in the vast Blue Nile gorge, "is still possible, but fraught with risks.
"To Egypt, water security equals national security," Hussein noted. "To Ethiopia, the dam has become a matter of national pride.
"An airstrike could turn the clock back on the dam. Although Ethiopia lacks the means to respond to such an attack in kind, Egypt risks earning the international community's wrath and seeing its relationships with sub-Saharan Africa strained."
But these relations are already strained over Egypt's claim that it has rights to 87 percent of the Nile's waters that were guaranteed under British-inspired treaties in 1929 and 1959 that also gave Cairo veto power over dam-building by upstream states.
Egypt was allocated 55.5 billion cubic meters a year of the Nile's flow rate of 84 billion cubic meters. Sudan, then Egypt's ally, got 18.5 billion cubic feet.
The Blue Nile joined the White Nile at Khartoum, capital of Sudan, to flow northward to the Mediterranean.
In 2010, Ethiopia, Rwanda, Tanzania, Uganda and Kenya signed an accord, the Cooperative Framework Agreement, to negotiate a more equitable water-sharing arrangement. They were later joined by Burundi , the Democratic Republic of Congo, Eritrea and South Sudan.
These upstream African nations, former colonies of the 19th century European powers, all say they need greater access to the Nile's flow to meet swelling demographic and industrial demands from a waterway that has sustained civilizations for millennia.
Much depends on how the current dispute plays out. Right now, an estimated 238 million people depend on the Nile to some extent.