Hosni Mubarak, the president of Egypt, demanded an immediate investigation into the accident, while a presidential spokesman said the speed at which the ship sank and the shortage of life rafts on board confirmed that there had been a safety problem.
The Italian classification firm RINA, which inspected the ship last year, said it was ready to co-operate with investigators.
According to shipping expert Yvan Perchoc, the Al-Salam Baccaccio 98 is one of several old Italian ferries to which extra levels were added to boost passenger capacity, sometimes threefold.
Farid al-Douadi, the ship's Saudi agent, said the Al-Salaam 98, registered in Panama, was built in 1971 and renovated in 1991. It had a maximum capacity of 2500 passengers.
An official at El-Salam Maritime Transport Company, which owned the Panamanian-registered ferry, said it remained unclear what had happened to the ship.
None of the officials said there was any indication that the sinking was the result of an attack on the ferry.
One expert said the ship had a loading mechanism for vehicles that could have let in water.
Richard Clayton, news editor at the shipping weekly Fairplay, said: "If these doors are open for any reason, then you've had it. The more we consider the various elements, weather does seem to have been a factor.
"All you need is bashing by the sea and suddenly you get an ingress of water."