Second seeded Sanam lost 2-6 2-6 to his top seeded rival, a local favourite, in the final match of the USD 15,000 hard court tournament.
The diminutive Indian had won his first title in America in March.
Meanwhile, N Sriram Balaji and former national champion Ranjeet Virali Murugesan won the doubles title in Sharam-Al-Sheikh.
The top seeded Indian pair defeated Egyptian fourth seeds Karim Hossam and Karim-Mohammed Maamoun 6-4 7-6 (10).
The second seeded Indian lost 6-7 (3) 4-6.
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