Houthis' Saudi blockade opens a perilous new front, rattling oil markets and global trade

Yemen's pro-Iran Houthi rebels have formally declared a maritime blockade against Saudi Arabia, raising the prospect that vital Red Sea shipping lanes could be choked off and further unsettling already jittery global energy markets. The declaration widens the regional damage caused by the ongoing US-Israeli war with Iran and adds a fresh layer of risk to global supply chains. The Houthis describe the move as retaliation, invoking an "eye for an eye" logic against Saudi Arabia for what they characterise as a 12-year siege of Yemen's ports and airports.

The immediate trigger came from a recent aviation dispute. On July 13, a Mahan Air flight carrying Houthi officials home from the funeral of Iran's Supreme Leader, Ayatollah Ali Khamenei, attempted to land at Sanaa International Airport in defiance of a long-standing Saudi air embargo. When the pilot pressed ahead despite warnings, the Saudi-led coalition bombed the runway, forcing the plane to divert elsewhere. The Houthis responded with ballistic missiles and drones aimed at Saudi targets, including Abha International Airport, effectively ending the truce that had held Houthi-Saudi hostilities largely in check since 2022. Iran is understood to have encouraged the defiance, calculating that renewed friction would reopen the conflict and disrupt Saudi shipping through the Bab el-Mandeb Strait.

The broader strategic aim appears to be subjecting the Saudi economy to something resembling the economic pressure Washington is applying on Iran. Tehran and the Houthis are working in tandem to open a second front in the Red Sea, seeing an opportunity to squeeze both Saudi Arabia and the United States while extending Houthi authority within Yemen itself. Even so, the group is not simply following Iranian instructions. It continues to act with a degree of independence, weighing costs against benefits, and is likely to pull back if the price of continued retaliation grows too steep.

To carry out the blockade, the Houthis draw on a substantial arsenal of anti-ship weapons developed with Iranian technical support, fielding more than ten distinct missile models, among them the Al-Mandeb 1 and 2, along with the Sayyad and Quds Z-0, some with ranges reaching 800 kilometres. Rather than targeting shipping indiscriminately, which would risk provoking a wider international response, the group could concentrate its fire on Saudi ports and Saudi-flagged vessels. By threatening the five main Saudi Red Sea ports, Duba, Yanbu, King Abdullah, Jeddah and Jazan, the Houthis need only stage a handful of strikes to persuade shipping companies that the route has become too dangerous to use.

The economic stakes of a closed Bab el-Mandeb are considerable. The strait normally carries around 12 per cent of global trade, a quarter of the world's container traffic and five per cent of its oil output. What makes the current moment especially dangerous is that the Strait of Hormuz has already been effectively shut by the US-Israel war with Iran, removing roughly a tenth of global oil shipments. Saudi Arabia had responded by redirecting over seventy per cent of its crude exports through the Red Sea instead, using its East-West Pipeline to move close to seven million barrels a day to the port of Yanbu. Should the Houthis succeed in closing the Bab el-Mandeb, too, those redirected exports would be left stranded, putting a further seven per cent of global oil supply at risk and cutting off around a quarter of the world's combined oil and gas flow. The volume of Saudi oil directly exposed would be roughly 2.5 million barrels a day.

Oil markets have already reacted with some volatility. Brent crude rose over 1.3 per cent to settle at $89.22 a barrel, while US West Texas Intermediate climbed to $83.23. A sharper price spike has so far been held off by a record 1.35 billion barrels of crude currently sitting in floating storage, which offers a temporary cushion against the shock. Vessels rerouting away from the Bab el-Mandeb face further complications too, since the Suez Canal cannot accommodate the largest crude carriers, while sailing around the Cape of Good Hope adds roughly 4500km to journeys from Saudi Arabia to the United States, pushing shipping costs sharply higher.

The blockade also threatens more immediate hardship within Saudi Arabia and the wider Gulf. With Hormuz already closed, the Red Sea has become an essential route for basic imports such as wheat, rice and animal feed. Saudi wheat stockpiles are large enough to last four to six months, but reserves of rice and feed are considerably thinner. Widespread hunger is unlikely, but scarcity and rising prices could still generate real domestic pressure on Riyadh to reconsider its approach.

Diplomatic efforts, meanwhile, continue. Mediators have put forward a proposal for a ten-day ceasefire aimed at rescuing a fragile interim agreement between Iran and the United States. Iran's Interior Minister, Eskandar Momeni, has also travelled to Islamabad to ask Pakistan to resume its earlier role as an intermediary between Tehran and Washington.