According to the reference book U.S. Army Patches, Flashes and Ovals: An Illustrated Encyclopedia of Cloth Unit Insignia, this is the second version of the patch worn by members of the Multinational Force and Observers (MFO), an international peacekeeping force created to oversee “the implementation of the security provisions of the Egyptian-Israeli Treaty of Peace and employ best efforts to prevent any violation of its terms.”
The MFO were originally provided by the United States with resources from its Sinai Field Mission with the intention that a force created by the United Nations eventually assume the role. But Russian threats to veto any proposal to establish such a force led the three parties (Egypt, Israel, and the U.S.) involved in the creation and signing of the Egyptian-Israeli Treaty of Peace to create an independent peacekeeping organization that did not require UN approval, and on 3 August 1981 the Protocol to the Treaty of Peace establishing the MFO was signed.
This second version of the insignia is larger than the original and is used as both a Shoulder-Sleeve Insignia and a Pocket Insignia. It is worn by U.S. Army personnel assigned to the MFO.
The Multinational Force and Observers patch was approved on 8 January 1982.