World oil has a Houthi problem

If you’ve ever tried to force a full suitcase shut by sitting on it, you’ll appreciate what the Houthis are now trying to do to global energy supplies.

That’s because after months of will-they-won’t-they, Yemen’s Iran-backed Houthis have finally done it: they’ve joined the Iran war.

Who now?

The Houthis are the hardline Shia offshoot from northern Yemen who’ve been running the capital since 2014. Famous for their cheerful slogan — ‘Allah is great, death to America, death to Israel, a curse upon the Jews’ — they’re Iran’s most enthusiastic if unpredictable partner, known for firing missiles at commercial ships.

And while the Houthis (named after their ruling family) might conjure up scrappy images of desert Fremen, they now rule over roughly as many people as the Saudis next door, and have managed to outgun a Saudi-led coalition for over a decade.

So now they’ve gone and done what?

The Houthis really entered the Iran war last month, enforcing an embargo on Saudi ports via hits on cities and energy infrastructure. They framed it all as a) righteous retaliation for Saudi hits, and b) choking Saudi’s remaining Red Sea exports.

But they’ve now gone harder — much harder — launching a lightning offensive to capture key Yemeni cities from Saudi-backed rivals right along the Red Sea coast!

In the space of just a few days, they’ve now yoinked…

• a) the port city of Mokha (coffee trading hub and moka pot inspiration)

• b) the coastal town of Dhubab (right on the Bab el-Mandeb bottleneck), and

• c) the island of Perim, which sits smack in the middle of that bottleneck.

Or translation: the Houthis now have a direct, land-based firing vantage over ships entering or exiting the Suez Canal corridor.

Or translation of the translation: Iran and its allies just expanded the scope of their oil-squeezing strategy from one critical strait (Hormuz), to two:

The Bab el-Mandeb, meaning ‘Gate of Grief’ due to its treacherous navigation conditions, is only 29km (18mi) wide: we’ve legit taken longer Ubers. And linking the Mediterranean to the Indian Ocean, it handles ~15% of world maritime trade.

So combined, this move now gives Iran and its friends potential leverage over a ~quarter of global oil, ramping up this conflict’s costs to extract more concessions and better terms.

Okay, so why squeeze now?

The Houthis blame recent Saudi airstrikes (targeting more Iranian arms deliveries) for breaking their fragile 2022 truce.

And that Saudi over-play came right as the kingdom was most exposed, sneaking 4% of the world’s oil away from Hormuz, instead out its Red Sea back door into markets. 

But no longer: the Saudis have now had to take their key back-door route offline because a drone hit the relevant pipeline. Hence oil now spiking back around $108.

So how are the Saudis responding? 

They’ve tried innovative new strategies like *checks notes*…

• Plan A: bombing the Houthis again

• Plan B: calling President Trump again (he’s busy with Iran), and even…

• Plan C: invoking the new Mecca defence pact with Turkey and Pakistan (though Mecca’s main agreement so far has been to not send troops to Yemen).

And this doesn’t leave the Saudis with many options: wade back into the same Yemeni civil war they just spent a decade trying to escape, or watch their own Davos-in-the-desert dreams get pantsed by neighbours still filming missile launches with a Nokia.

But lest anyone snort too much, keep in mind that whatever hurts the Saudis also hurts us all via higher oil prices.

Sound even smarter:

• US Central Command chief Admiral Brad Cooper flew to Jeddah on Monday to offer the crown prince (MBS) increased intelligence-sharing and targeting assistance, but no more.

• US diesel prices are now at ~$6/gallon, a new nominal record.