On July 13, 2026, bombs struck the runway at Sanaa International Airport as an Iranian plane arrived carrying a Houthi delegation that had attended the funeral of Iran’s assassinated supreme leader, Ayatollah Ali Khamenei. Although Yemen’s internationally recognized government publicly claimed responsibility for the operation, saying that its patience with Iranian aircraft in Yemeni airspace had run out, the Houthis (Ansar Allah) attributed the strikes to Saudi Arabia and announced that de-escalation was over. On July 14, a senior Houthi political figure, Mohammed al-Bukhaiti, threatened a “siege” on the kingdom, and within days the Houthis launched ballistic missiles and drones at Abha International Airport in southern Saudi Arabia.
Then, on July 20, the Houthis declared a maritime blockade of Saudi Arabia and warned shippers not to use Saudi ports. Two days later, the Houthis claimed strikes on the tankers Encelia and Layla, one of which Saudi authorities confirmed had been hit. On July 24, Riyadh responded with airstrikes on Houthi military sites in Hodeidah governorate that its coalition spokesman characterized as a “proportionate military response,” insisting the port itself had not been targeted. The Houthi foreign ministry, however, promised “escalation for escalation,” and roughly 24 hours later missiles and drones set fire to the Aramco refinery at Jazan and struck facilities at the Red Sea port of Yanbu in the first direct Houthi assault on Saudi oil infrastructure in four years.
But this is just one part of a larger conflict. Since the US-Israeli strikes of February 28, 2026, and the killing of Khamenei, Iran has closed and attacked shipping in the Strait of Hormuz and struck US military bases and allied energy infrastructure across the Gulf, provoking successive rounds of US retaliation and a naval blockade of Iranian ports. Gulf states have spent five months trying to keep the costs of that war outside their borders. Saudi Arabia, in particular, built its wartime economic survival on a single alternative route, the East-West Petroline, stretching from the Abqaiq oilfields to Yanbu, which carried most of the kingdom’s seaborne crude once Hormuz became unusable. The Houthi announcement did not just open a second front in Yemen; it also placed Saudi Arabia’s alternative route under the same threat as Hormuz itself.
Why Did the Saudi-Houthi Truce Break?
The 2022–2026 truce between the Houthis and Saudi Arabia proved unexpectedly durable, surviving the Houthis’ entry into Hamas’s war on Israel after October 7, 2023, their 18-month campaign against commercial shipping in the Red Sea, and the sustained US naval and air operation in 2025 intended to break Houthi control over the Bab al-Mandab Strait. The ceasefire persisted because both sides wanted it to. Riyadh wanted an exit from a war it could not win, while the Houthis wanted the blockade lifted, salaries paid, and international recognition of their control over the north. In 2024 and 2025, moreover, the Houthis’ attention was largely focused on the confrontation with Israel and the United States, not Saudi Arabia.
But even before July 2026, that equilibrium had already begun to erode. The 2023 UN-brokered roadmap committed Saudi Arabia to funding public-sector salaries, including in Houthi-held territory, but Washington’s March 2025 designation of the Houthis as a foreign terrorist organization made such transfers legally impossible, leaving Riyadh supporting the internationally recognized government while failing to deliver the Houthis’ central demand. The result was a stalemate in which the Houthis held territory but not solvency.
The language used by Houthi officials is a bargaining position as much as a slogan.
Domestic economic pressure became a driver of escalation. Public employees in Houthi-controlled areas have gone without regular pay since 2016, nearly two-thirds of Yemen’s teachers receive no salary at all, and the authorities in Sanaa have resorted to improvised levies on merchants to cover a widening fiscal gap. A movement that governs without paying its bureaucracy has a structural incentive to look for leverage. Reopening Sanaa airport and lifting maritime and aerial restrictions are required for Houthi fiscal viability; their blockade of Saudi Arabia appears intended to impose similar pain until their demands are met. The language used by Houthi officials—“a siege for a siege” and “an eye for an eye”—is a bargaining position as much as a slogan.
The timing of the breakdown of the truce cannot be explained by economics alone, however; the Houthis’ financial constraints have been constant for several years now. What changed was the regional war. Since February 2026, when the US-Israeli war against Iran began, the Houthis had largely stayed out of the conflict’s maritime dimension; Washington itself noted that the group had behaved with restraint. But reporting in mid-July indicated that Iranian leaders had asked the Houthis to prepare strikes on Red Sea shipping should US attacks extend to Iranian energy and power infrastructure. A few days later, on July 20, the Houthis announced a blockade of Saudi vessels in the Red Sea. The likeliest interpretation is that the Houthis chose, at a moment of maximum Iranian need, to convert a bilateral grievance with Riyadh into a contribution to Tehran’s pressure campaign on the global economy. Targeting the Red Sea after closing Hormuz pushed crude oil prices higher, with Brent rising above $100 a barrel after the tanker attacks and again after the Jazan fire. Higher prices tighten the political constraints on Washington and its allies far more efficiently than anything else the Houthis can do militarily.
Deterrence Without Entanglement
Saudi Arabia is pursuing a limited yet difficult objective, which is to deter Houthi shipping interference without being drawn back into the same kind of war of attrition that it was fighting in Yemen between 2015 and 2022. To this end, Riyadh explicitly framed its strikes on Hodeidah as proportionate and confined to military targets; the kingdom insisted that Hodeidah, Ras Isa, and Salif remained open to commercial and humanitarian traffic. Saudi Arabia is also limiting its direct involvement by working in tandem with the internationally recognized government, led by President Rashad al-Alimi and the Presidential Leadership Council (PLC). Within a day of the Aramco strikes, the recognized government’s air force conducted some of its first offensive operations of the new round against Houthi launch sites and depots in Marib and al-Jawf. Yet delegating to the PLC does little to protect Saudi territory, and Abha, Jazan, and Yanbu are all comfortably within range of Houthi missiles. Encouraging an intra-Yemeni escalation while exposed to missile and drone retaliation is a risky strategy.
Saudi Arabia has been unable to escape the economic fallout from the conflict.
Saudi Arabia has been unable to escape the economic fallout from the conflict. The kingdom posted a first-quarter 2026 budget deficit of 125.7 billion riyals (roughly $33.5 billion), the largest quarterly shortfall on record. The deficit consumed three-quarters of the full-year projection in ninety days; it was driven by a 20 percent surge in spending that included a 26 percent rise in military outlays and financed entirely by borrowing. These are essentially wartime costs of the US-Iran conflict in which Saudi Arabia is not formally a belligerent.
Saudi exports are also constrained. While Hormuz was closed and Gulf logistics were disrupted, Asian refiners diversified toward American, Central Asian, and Russian spot cargoes. Russia consolidated its position as the largest supplier to both China and India. When the mid-June Memorandum of Understanding briefly reopened the strait, Aramco slashed its prices sharply to win back customers in Asia. But the Houthi blockade now means reaching those customers requires passing through a strait the Houthis control—with insurance costs for that route running 30 times higher than for safer ones.
The most durable damage, however, is reputational. Saudi Arabia’s Vision 2030 economic strategy rests on the premise that the kingdom is a stable destination for long-horizon foreign capital. Iranian missiles and drones have already undermined the image of the Gulf as secure territory for investment, business confidence has visibly declined, and Riyadh is expected to redirect Vision 2030 spending toward logistics and infrastructure as it struggles to attract foreign capital and talent. Analysts had already warned that early-stage investments and financing decisions would stall for as long as the conflict lasted. The resumption of strikes on Saudi soil by the Houthis risks jeopardizing the kingdom’s foreign direct investment targets, as well as the commercial case for the flagship projects themselves.
Can Riyadh Manage an Unpredictable Washington?
Washington’s position on the Houthis is unambiguous. On July 23, President Trump warned that any further strike would bring “major military punishment” on both the Houthis and Iran, which he holds responsible as the group’s patron. Washington’s stake here has less to do with Saudi Arabia than with freedom of navigation. If Iran can close Hormuz and the Houthis can close Bab al-Mandab, US naval primacy means little in practical terms. The United States will pay a considerable price to avoid that outcome.
Saudi management of Washington’s volatility has, in fact, been reasonably effective.
The Saudi position is more nuanced. Reports suggested that having initially engaged against Iranian missile and drone sites, Riyadh shifted toward pressing for a diplomatic resolution once Iranian retaliation reached Saudi energy facilities. But claims are overstated that the relationship with the United States ruptured after the kingdom refused the use of its bases for operations against Iran. The relationship remains substantial enough that Washington and Riyadh signed a civil nuclear cooperation agreement in the middle of this crisis.
Saudi management of Washington’s volatility has, in fact, been reasonably effective. When President Trump announced a 20 percent transit fee on cargo crossing Hormuz in exchange for American protection—a measure that the UN maritime agency deemed illegal and that inadvertently validated Iran’s own claim to levy tolls—Gulf leaders called the White House directly. The proposal was withdrawn within a day and replaced with promises of expanded Gulf investment in the United States. The episode showed how abruptly the Trump administration can turn against allies’ interests—and how much influence Riyadh retains in reversing it.
Conclusion
Saudi Arabia’s next steps depend less on developments in Yemen than on Washington’s decision between escalation and negotiation. Recent days have offered ambiguous signals: The United States has paused its nightly bombardment of Iran while President Trump’s statements suggest that a larger strike remains under consideration. A wider war would leave the kingdom with two closed maritime routes and two active adversaries.
For its part, Riyadh has not yet decided how far it is prepared to go against the Houthis—and the cost of postponing that decision is rising. Since 2022, Saudi Arabia has worked to reduce its military commitments abroad so that it could concentrate resources on economic transformation at home. The events of July 2026 indicate that regional conditions may no longer permit that separation. The immediate risk lies less in a deliberate Saudi decision to escalate than in the possibility that a fragile regional environment draws the kingdom into a wider conflict.
The views expressed in this publication are the author’s own and do not necessarily reflect the position of Arab Center Washington DC, its staff, or its Board of Directors.
Featured image credit: SPA
