A years-long, fragile truce in Yemen has deteriorated significantly this week as Iran-backed Houthi fighters successfully displaced Saudi-backed Yemeni forces from a critical section of the Red Sea coastline. According to statements from the Houthis and a rival Yemeni commander, the group has secured control of the port city of Mokha, located just north of the strategic Bab al-Mandeb waterway.
The military escalation in Yemen, coupled with Houthi targeting of Saudi oil carriers near the waterway and a separate exchange of fire between the United States and Iran in the Persian Gulf, has caused global oil prices to surge. Brent crude, the global benchmark, climbed to nearly $110 per barrel. The London-based research firm Capital Economics warns that the ongoing conflict on both sides of the Arabian Peninsula heightens the risk of additional energy price spikes in the near future.
In the United States, consumers are already facing significant costs, with gasoline prices rising 34% compared to this time last year, currently averaging $4.28 per gallon. Diesel fuel, essential for the trucking and farming industries, has seen an even sharper increase of 61%. Data from maritime analytics firm Kpler indicates that Saudi Arabia exported only 3.2 million barrels of oil per day last month, marking its lowest export level in over a decade.
While elevated prices help Gulf Arab producers mitigate the impact of lower export volumes, they continue to grapple with widening budget deficits, partially exacerbated by maritime attacks in the Strait of Hormuz. Saudi tankers are now forced to navigate dangerous routes to bypass Houthi attacks in the Bab al-Mandeb corridor. Furthermore, because Saudi Arabia serves as a key stabilizer for OPEC, the curtailment of its exports—alongside difficulties faced by other regional producers—has prompted nations globally to utilize emergency oil reserves to address the supply gap.
To maintain flow following Iran's closure of the Strait of Hormuz, Saudi Arabia had previously utilized an east-west pipeline to the Red Sea. However, the ongoing Houthi attacks have now necessitated a longer, more expensive route through the Suez Canal and around Africa to reach Asian markets. The seizure of Mokha follows recent Houthi missile and drone strikes against four regions in southwestern Saudi Arabia, which the group characterized as retaliation for Saudi airstrikes in Yemen, including one that resulted in civilian casualties at a prison. The Saudi Energy Ministry reported that these attacks struck oil facilities, causing fires and forcing a temporary halt to operations, with over 70 people wounded.
The conflict remains intense 11 years after Saudi Arabia initiated a coalition war to restore the Yemeni government and reverse the Houthi takeover of Sanaa, which the group still occupies. While the U.S. views the Houthis as an Iranian proxy, Iran’s Foreign Ministry maintains that the group operates independently. Meanwhile, the United Nations' International Organization for Migration reports that recent fighting has displaced at least 18,500 people, who are arriving at humanitarian sites that currently lack adequate food and shelter.
