Oceanic model simulations and model-based energy budget calculations have been used to quantitatively study the relative importance of different processes affecting the Gulf of Eilat/Aqaba dynamics and hydrographic conditions. Large seasonality among various energetic pathways is observed. Similar to other oceanic waters, a significant amount of energy is stored in the potential energy (PE) that is predominately in the form of background potential energy (BPE). During September-March PE/BPE gains energy by raising the center of mass due to atmospheric cooling. During April-August, PE decreases its strength due to the exchange of light, warmer water from the northern Red Sea through the Strait of Tiran. The available potential energy (APE) is stored in baroclinic modes that are linked to the along-gulf temperature gradient. During April-August, the APE is sustained by baroclinic energy flux through the straits, resulting from advective density fronts into the gulf, and during September-March, the APE is sustained by the differential heating at the surface. Part of the APE is converted into kinetic energy (KE) by vertical buoyancy flux and in smaller quantity to background potential energy by isopycnal mixing. The conversion from APE is the only source of KE, where losses are related to the work done by pressure at the straits and energy dissipation. The wind stress work subtracts energy from the buoyancy-driven flow, which explained by the opposite surface flow and mean wind directions. The authors found that temperature and salinity variations contribute to the dynamics, via the APE-KE conversion, by a ratio of 10:1.