Yemen-Saudi conflict spins out of control, drives up oil prices

The conflict between Saudi Arabia and the Yemeni militant group Ansarallah (commonly known as the Houthis) shows no signs of slowing down and continues to drive up oil prices. Despite constant aerial bombardment from the Saudis, the Houthis continue targeting Saudi oil infrastructure, including pipelines, refineries and ports. The Houthis are also operating a blockade of Saudi ships attempting to exit the Red Sea via the Bab al-Mandeb Strait off the coast of Yemen.

On Wednesday, oil was trading at $108 a barrel (the highest since mid-May) until dropping off slightly to $106 at the end of the day. Most significantly, the average price for a gallon of diesel in the US hit $6.30, an all-time record. High diesel prices are a particularly potent driver of inflation since it increases the costs of transporting goods and running things like farm machinery.

How did we get here?

A civil war that began in 2011 left Yemen divided with the Houthis controlling the northwest (where 80% of the population lives) and a Saudi-backed government (based in Aden) controlling the rest. Since 2015, the Saudis have blockaded Yemen, purportedly to prevent Iran from arming the Houthis. However, the blockade has only succeeded in causing the deaths of hundreds of thousands of Yemenis due to starvation and lack of medical supplies. In 2022, the Houthis and Saudis signed a truce, but the blockade remained in place.

When the US and Israel attacked Iran, the closure of the Strait of Hormuz left the Saudis totally reliant on the Red Sea passage to export their oil. Then in July, the Saudi-backed Yemeni government (at the direction of the Saudis) bombed the Houthi-controlled civilian airport in Sanaa. The Saudis claimed that a plane arriving from Iran was carrying weapons and cited the need to enforce the blockade.

The Houthis then declared their own blockade of Saudi ships and began striking Saudi oil infrastructure. Houthi forces have also seized territory from Yemen’s Saudi-backed government. They now control all of Yemen’s Red Sea coast and continue advancing in the direction of Aden.

Will the US get involved?

There’s no avoiding the conclusion that the Saudis have wildly miscalculated. They either underestimated the Houthis’ ability to strike back, or overestimated their own capability to withstand the blowback.

Before the Sanaa airport strike, Saudi Crown Prince Crown Prince Mohammed bin Salman sought and received a greenlight from President Trump. At the time, MBS said the Saudis would not need US military support to deal with the Houthis. He has since changed his tune and has asked Trump to bomb the Houthis on multiple occasions but Trump has refused.

Over the weekend, US officials met with Houthi representatives in Oman. The US reportedly received assurances from the Houthis that their blockade will target only Saudi ships and that ships from other countries (including the US and Israel) are free to pass the Bab al-Mandeb Strait. Even if the US did feel it had a pressing interest to get involved, our ability to do so has been greatly diminished due to the munitions shortage from the ongoing Iran war.

The Saudis are now seeking help from other countries, so far without success.

There are various ways this could play out. A negotiated settlement with Iran in the near future could change the strategic picture. However, many analysts overestimate Iran’s ability to control the Houthis. While the Houthis receive considerable backing from Iran, they have their own domestic strategic and political interests. One of their chief interests is forcing the Saudis to lift their decade-old blockade. The more territory they seize and the more pain they inflict on the Saudis, the more leverage they have to achieve this.