In searching for an answer to the question of the Sheikh's symbolism, I looked through his appearances in the plot to gain a superficial understanding of his character. While doing so, one finds out that the Sheikh's house provides Said with a place of refuge (the only other place besides Nur's apartment) and that the Sheikh offers Said alternatives to seeking revenge. He is characterized as the wise character, who speaks "in a voice like Time" and who constantly equivocates in his replies to Said. So far, so Dumbledore. The Sheikh's closest relative in Jung's twelve archetypes would be The Sage. This reveals ideas he is likely to represent, including intelligence, wisdom, or thought.
Given the context of this novel, I believe that the Sheikh represents the possibility arising from positive knowledge. Consider the sphere of the novel: Rauf represents the bad intellectual who falls prey to his desires, while Said represents one of the working class that has more recently learnt to love knowledge. It follows that the Sheikh lies at the opposite end of the spectrum, as the good intellectual who uses his knowledge for the benefit of others (by leading religious ceremonies, protecting Said etc.). This dichotomy of good versus bad intellectual is even more significant given the context of the 1952 Revolution. In the words of Alaa Amr Saad, there was an 'Intellectual Crisis' during the time of General Nasser's rule, which led to the "socio-political struggle between working class versus the segment of opportunist so called 'intellectuals'". This occurred around the same time that The Thief and the Dogs was written.
Another aspect of what the Sheikh represents is 'possibility'. He repeatedly offers Said other options asides from seeking revenge and this is especially evident in Chapter 2, the first time we see the pair interact. For example, when Said details his life problems to the Sheikh, the latter simply says "Wash and read". In this way, the Sheikh guides Said away from his present. Furthermore, the Sheikh also shows no sign of having recognized Said's descriptions of his father, which firmly cements him as a non time-specific character (unlike Nabawiyya, for example, who's mostly spoken about in the past). This variety of choices presented to Said characterizes him and reveals to the reader the intensity with which Said needs his revenge. The fact that chances are provided for him to steer clear also draws attention to the free will (or lack thereof?) of Said. By characterizing him via the actions of the Sheikh, Said is seen as a stubborn but misguided character.
Finally, an interesting concept to consider is the role of religion in the novel. We learn that Said's dad was a religious, loving man, and that speaking to the Sheikh often conjured up images of Amm Mahran in Said's head. This undeniable link between religion and Said's innocence could perhaps be alluding to the time of unity before the Revolution, when the intellectuals and working classes were working together for a common goal. Then, knowledge was being used positively, unlike during Said's time. At the center of this religious theme is the Sheikh, who facilitates the exploration of many of these questions. In including these themes, Mahfouz engages the reader by hinting at various 'answers' to Said's problems: Should he simply let go? Should he follow the path of religion? Is it even possible for Said to let go of these issues?
As we have studied in class, this novel is one that leaves many blank spaces for the readers to fill. We've had heated discussions on the goodness of Said's character, the existence of fate within the novel, etc. The symbolism of Sheikh al-Junaydi is no exception. Personally, Mahfouz's ability to subtly raise questions about our society is one of the main factors that engaged me in the novel, especially as it often presented evidence for both positive and negative answers to these questions.