Houthi strikes on Saudi energy infrastructure could keep oil above $100 a barrel and pull Pakistan, Turkey, and others into a widening web of regional conflicts.

While the outcome of the Iran war is of considerable geoeconomic importance, Yemen’s Houthis have the potential to be an equally daunting threat to the global economy, especially with an eye to energy prices and entangling alliances. 

The Houthis occupy an important strategic location, neighboring Saudi Arabia and sitting across from the politically tense Horn of Africa. In 2025, they amply demonstrated an ability to hit Red Sea shipping, which resulted in US air attacks, a situation that later that year morphed into a US-Houthi truce. Since July 2026, they have driven south into the parts of Yemen they do not control, seeking to gain greater control of the Bab el-Mandeb Strait while launching ongoing drone and missile attacks against Saudi infrastructure. 

Why Iran and China Have Armed the Houthis

The Houthis’ rise has been aided for over a decade by Iran, which has found it strategically useful to help a fellow Shia community, surrounded by Sunnis (most of Yemen’s population and neighboring Saudi Arabia and Oman). Tehran has supplied them with ballistic missiles, cruise missiles, and anti-ship weapons. At war off and on with the rest of Yemen since 2004, the formerly marginalized Houthis are now one of the region’s most effective military forces. China has also helped the Houthis, selling them Chinese-made components for missiles in exchange for immunity for Chinese-flagged ships in the Red Sea.

While Iran may see the Houthis as a junior partner, they don’t. As former US ambassador Barbara Leaf, who served as the US assistant secretary of state for Near Eastern affairs in the Biden administration, noted, “They do not see themselves as the junior partner to Iran or least of all a proxy. They regard themselves as a power unto themselves. They’re determined to demonstrate that.”

The Houthis have a sense of grievance vis-à-vis the Saudis, whom they regard as unworthy of guardianship of Mecca due to their ties to the United States and, by extension, Israel. Moreover, the Saudis have meddled in Yemeni affairs for decades. It is time for payback. 

How Houthi Attacks on Saudi Oil Threaten Global Prices

In early October, they attacked Saudi Arabia’s energy infrastructure and Riyadh’s international airport, killing 18 people and injuring others. In a sense, the Houthis are bringing the fight to Saudi Arabia where it hurts most—its energy sector and sectors that are central to the government’s efforts to diversify away from oil. Bringing that point home, the Houthis attacked the headquarters of their neighbor’s national oil company, Saudi Aramco, causing extensive damage in what is regarded as the nerve center of Aramco’s operations. 

The Houthis are threatening to continue to strike airports and energy infrastructure in the Saudi interior and urging global shipping companies, citizens, and employees at these locations to evacuate. Moreover, they regard those foreign companies as “legitimate targets.”

Why do we care? Global oil prices are already tracking over $100 a barrel. If the Houthis can destroy enough of the Saudi energy sector by hitting refineries, knocking out pipelines, and threatening shipping in the Red Sea, they can keep pressure on global oil prices, which helps their ally, Iran, which needs ongoing economic pressure on the US. 

How the Houthis Are Testing Saudi Arabia’s New Defense Pact

But the situation is even more complicated. The United States, which has a considerable military buildup in the region and is expected to take more aggressive action against Iran after the November 3, 2026, midterm elections, has been notable for keeping Yemen’s chaotic and Byzantine civil wars at arm’s length. In turn, the US conflict with Iran and the related damage to Saudi infrastructure has forced Riyadh to acknowledge that Washington cannot be counted on to fully defend its national security. This was a motivating dynamic for the Mecca Joint Defense Agreement with Turkey and Pakistan. Signed in August 2026, the agreement stipulates that “any armed attack against any one of the three states shall be regarded as any attack against them all.” If this was intended to scare the Houthis into stopping their attacks on Saudi Arabia, it failed.

The Houthis pose a geopolitical dilemma to Pakistan and Turkey. The kingdom is a major source of oil for both countries and Riyadh has been a very important financial supporter of the heavily indebted Pakistani state. Pakistan has borrowed $3 billion from the Saudis, which was recently provided to help stabilize the South Asian country’s economy. Considering this, it is no surprise that Pakistan has committed to the deployment of a military force to Saudi Arabia, with Pakistan’s Prime Minister Shehbaz Sharif stating that his commitment to Saudi Arabia’s sovereignty is “unwavering.”

Why Pakistan and Turkey Are Wary of Fighting the Houthis

But Pakistan’s position is more complicated. It shares a lengthy and porous border with Iran, has sought to be an honest broker in negotiations between Tehran and Washington, and is attempting to improve relations with the United States after having built up a significant dependence on China (which proved difficult in dealing with Pakistan’s debt restructuring). Additionally, Pakistan’s relations with Afghanistan’s Taliban government are tense, with border conflicts as well as Pakistani aircraft strikes inside Afghanistan. Pakistan wants the Taliban government to stop militants (mainly from the Pakistani Taliban) from using Afghan territory to launch attacks inside Pakistan.

Although Turkey has sent support staff and drones to Saudi Arabia, it also appears to be reluctant to directly engage the Houthis. Despite the US economic embargo on Iran, Turkey has a large trading relationship with its neighbor, with a hoped-for target of $30 billion in cross-border trade. Moreover, Turkey is playing a significant role in Syria, a country in which Iran believes it has a special interest, especially as it serves as a conduit of weapons and funds to Lebanon’s Hezbollah. One last item in this situation is that Turkey is a NATO member. Would its engagement in a war with the Houthis involve NATO? 

How Overlapping Conflicts Stretch from the Caspian to the Horn of Africa

The Houthi threat is layered onto an arc of potentially overlapping conflicts and strategic alliances that stretches from the Caspian Sea to the Horn of Africa. The Iran war has engaged the United States, Israel, the Gulf states, Egypt, and Jordan. The Houthis are engaging Saudi Arabia, and Turkey and Pakistan are now being drawn into the conflict. Ukrainian forces have attacked Russian assets in the Caspian Sea while Israel bombed Iranian assets on the same body of water. Across the Red Sea, fighting has returned to Ethiopia vis-à-vis the Tigray (internally) and Eritrea. Russia has gained a naval base at Port Sudan and its mercenaries are reportedly in action in Sudan’s nasty civil war; Turkey is providing military advisors to Somalia’s central government; and Israel is the first country to officially recognize Somaliland, home to one of the region’s best ports, Berbera (which used to be a naval base for the Soviet Union during the Cold War). 

The United Arab Emirates has been an active supporter of Ethiopia, providing it with investment and military assistance, and its Dubai World is upgrading the port at Berbera. The Persian Gulf country has also been active in Ethiopia, home of the Grand Ethiopian Renaissance Dam (GERD) at the headwaters of the Blue Nile. That support puts it at odds with Egypt, Eritrea, Somalia, and Sudan, which in early October held a summit stressing their concern over the GERD and its impact on Nile water flow and territorial sovereignty across the Horn of Africa.

Rounding out the picture, China is a major economic power throughout the region, as the largest trading partner of Iran, Iraq, Ethiopia, Saudi Arabia, Sudan, and Pakistan. For its part, in 2025 China imported a little over 50 percent of its oil from the Middle East, making it an interested party. It also has naval forces based in Djibouti, along with the United States, France, Japan, Italy, and South Korea. China prefers to be a behind-the-scenes actor, but the longer the conflict in the Persian Gulf extends, the deeper the energy bite. The situation also increases the scrutiny of China’s role with the Houthis as well as its ongoing trade relations with Iran. 

Why the Houthis Pose a Dilemma for Washington

Into this cauldron of Byzantine geopolitics, a broader conflict with the Houthis will intensify already high regional tensions. It also offers up a scenario in which various regional powers become more active and are drawn into local conflicts as in the Pakistani and Turkish cases. 

The Houthis pose a major problem for the United States—it is already fighting one war; it does not need another. Indeed, while the Trump administration condemns the Houthi advance down the Yemeni coastline, the United States has held off any military responses. It has also been reported that the Houthis have reassured the United States that the 2025 ceasefire between them is still in force, meaning that only Saudi shipping will be attacked, not US shipping. This puts the Houthi problem on hold for now, but ongoing damage to Saudi oil infrastructure keeps a foot on the gas pedal, something that is obviously a concern for President Donald Trump. 

For now, the Houthis have a strong geoeconomic card to play if they can radically reduce the Saudi ability to supply global oil and gas markets as well as complicate the passage of commerce in the Red Sea. The even larger risk is that the arc from the Caspian Sea to the Nile has too many entangling alliances, involving regional and global powers. As with the Balkans in 1914, at some point there is a real danger that the fuse is lit. 

About the Author: Scott B. MacDonald

Dr. Scott B. MacDonald is the chief economist for Smith’s Research & Gradings and a fellow with the Caribbean Policy Consortium. Prior to those positions, he worked for the Office of the Comptroller of the Currency, Credit Suisse, Donaldson, Lufkin and Jenrette, KWR International, and Mitsubishi Corporation. His most recent book is The New Cold War, China and the Caribbean (Palgrave Macmillan 2022).

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