Houthi Red Sea Advances Threaten Global Oil Prices and US Foreign Policy

Iran-backed Houthi fighters have seized control of Yemen's Red Sea coast and strategic islands, positioning themselves to threaten the Bab el-Mandeb strait, a vital global shipping chokepoint. This escalating conflict risks disrupting oil supplies, impacting global inflation, and challenging economic growth worldwide.

The Houthis' recent advances, described as a lightning advance this month, have extended the wider Middle East conflict and further jeopardized global energy supplies. Oil prices surged above $100 last week following a drone strike that shut down a key Saudi oil pipeline. Simultaneously, Houthi advances threatened the Red Sea route that Saudi Arabia had been utilizing to bypass the Strait of Hormuz.

Despite repeated pleas from Saudi Crown Prince Mohammed bin Salman, Washington has so far declined to join the fight in Yemen. The Houthis, who have controlled Yemen's capital since 2014, seized the country's Red Sea coast this month in an offensive that overwhelmed Saudi-backed government forces. Saudi Arabia has responded with hundreds of strikes on Houthi positions.

The Houthis have retaliated with attacks on Saudi territory, including a strike on Riyadh and assaults on facilities belonging to Saudi oil giant Aramco in the Red Sea port city of Yanbu. The group is now attempting to seize strategic heights in Taiz and Lahij provinces, which would further isolate the Red Sea coast from government-held areas.

Mohammed Al-Qadhi, a Yemeni political analyst, noted that government forces appear to be in a defensive posture following the loss of the Bab el-Mandeb area, while the Houthis aim to maintain momentum despite facing intensive air strikes. He added that the control of the mountainous terrain could be critical in determining the outcome of the current territorial gains.

While the Houthis have stated they do not intend to impose formal transit fees on vessels passing through the Bab el-Mandeb Strait, there are indications that they have extracted informal payments from some shipping agencies for safe passage. The group also claims to be targeting only Saudi-linked vessels, but the global nature of oil transport means that attacks can have far-reaching commercial consequences.

The Houthi advance poses a significant risk to Saudi Arabia's oil export route, which had become an alternative to the Strait of Hormuz after a drone attack on September 11 shut down the East-West oil pipeline. Although Saudi Arabia has begun to restart the pipeline, full capacity could take up to eight weeks to restore due to damage to pumping stations.

The Bab el-Mandeb strait is a crucial artery for global seaborne commodity and goods shipments, particularly for traffic between Asia and Europe via the Suez Canal. Disruption there forces vessels to reroute around the Cape of Good Hope, adding significant time and cost to journeys.

The Houthi campaign of attacks on shipping in the Red Sea and Bab el-Mandeb, which began in late 2023 and which the group stated was in solidarity with Palestinians in Gaza, has already had a significant impact. Major shipping firms have rerouted vessels, leading to surged freight costs and extended journey times.

The escalating conflict has also presented a dilemma for the US. The New York Times reported that the Trump administration had prepared to launch airstrikes against the Houthis after new requests from Saudi Arabia, but President Trump called off the strikes at the last minute. Rashid al-Alimi, president of Yemen's Saudi-backed government, reportedly requested US military assistance by phone, though no direct pledge of support was made.

The G7 foreign ministers condemned the continued strikes waged from Yemen against Saudi Arabia and urged the Iran-backed group to cease all military actions and return to political negotiations. They also called on Iran to end its arming and support of the Houthis, citing violations of UN Security Council resolutions.