Because Nasser's leadership over the Arab world was was not only dependent on Egypt's realpolitik power, but also on his moral authority as the leader of a pan-Arab ideology. Nasser's victory during the Suez canal crisis cemented his role as an anti-western leader.

What happened was that Egyptian foreign policy in the 1960s was a distinct failure. The two most important ones are the dissolution of the United Arab Republic, and the defeat in the six day war against Israel. The former undermined the core stated goal of Nasserism: which is to remove artificial boundaries imposed by European colonialism and form a pan-Arab state. The second showed the real failure of Nasser's attempt to strengthen the Egyptian state and armed forces internally. The fact that the defeat to Israel was embarrassing since pan-Arabism placed high priority on the defeat of Israel and now Egypt actually lost a significant amount of territory to them.

The full brunt of the embarrassment caused Nasser to outright resign (though he later returned to office, but he died shortly after) and Egypt never recovered the sort of prestige it had in the 1950s and early 1960s. While Sadat was to recover some Egyptian prestige in the Yom Kippur war, Egypt would never regain its position as the head of the Arab world.