Middle East Update: Houthi Ceasefire and the Coming Iran Deal
Yemen, Gaza, Syria, Iran, and Israel are interlinked theatres, and Trump has given away his actual plans.
Commercial Summary: The abandoning of Israel in the freshly announced US-Houthi deal suggests that Trump will make a deal with Iran on the nuclear programme by the end of 2025. The Trump administration will not say it, given its domestic dynamics, but, just as it abandoned Israel over the Houthi, it will eventually do so over Gaza.
Despite Hezbollah’s defeat in Lebanon, Israel’s troubles are only growing.
On 6 May, Trump announced that the Americans would stop bombing Ansar Allah (the Houthi) in Yemen, and that the Houthi would stop attacking American shipping. The deal does not include Israel, as per the spokeswoman of the US Department of State. Early reports suggest that Israel was not even informed. Moreover, the deal made no mention of other international shipping.
On 4 May, the Houthis fired a missile that landed in the vicinity of Ben Gurion Airport, Israel’s main international airport. Israel retaliated with airstrikes on San’a airport and Hodeidah. The Houthi declared that it would continuously attack the airport to impose an air blockade. Aegean Airlines, Delta, Ryan Air, Lufthansa Group, ITA, Iberia, Air France, British Airways, Air India, and others, have cancelled flights, mostly for a few days to reassess the situation.
From November 2023, we had been saying that there was no solution to the Houthi problem. We changed our view after Israel’s performance against Hezbollah, believing that, if the US could collect a similar level of intelligence, it would be successful against the Houthi this time. There is no evidence that the Americans have such intelligence. As such, our view now is that the USA and Israel can inflict pain on the Houthi, but can only degrade, and not stop, their missile strikes. Conversely, however, although the strikes on Israel are embarrassing and are economically damaging, the Netanyahu cabinet can live with them, as it pursues its objectives in Gaza. What the Israelis cannot live with is the fact that the Americans abandoned them, allowing the Houthi to continue the campaign against Israel.
Gaza
Israel has authorised the full reoccupation of Gaza. Its aim is to ethnically cleanse the enclave, at least partially, and re-settle it. Israel can live with a permanent security presence in Gaza that permits it to conduct security raids at will. But it cannot accept a political settlement that allows Hamas to recover.
On the ground, Israel is still fighting in northern Gaza, which it first entered on 27 October 2023. This suggests that the Israelis are still struggling with on the ground operations. The new plan requires the recruitment of reservists. However, the problem for Israel is that reservists are refusing to join, with between 50%-60% not showing up for call-ups, and a third of youth who should be drafted refusing to join the IDF.
For Hamas, therefore, the objective is just to survive, maintain an insurgency no matter how crude, and keep forcing Israel to intensify its efforts to draft soldiers. Its hope is that the Israeli military will break, or that this would result in political change in the 2026 Israeli elections. For Israel, the incentive then becomes to maximise the civilian suffering in Gaza, to ensure that Hamas fighters and their broader community does not receive the resources required to prolong the fight, including food and medicines.
Syria
In Syria, the government of Ahmed al-Shara’, formerly of Jabhat al-Nusra and Islamic State in Iraq and Syria, is trying to consolidate over the country and impose centralised authority. His view is that the experiments in Iraq and Lebanon with confessional, concosciational democracy are failures, and therefore centralised rule is necessary. Shara’s forces successfully attacked the Alawites. Now they are trying to force the Druse to disarm before attacking the Kurds, with Turkish backing.
Israel is trying to support the Druse of Souweida and the Golan to block this consolidation. The risk to Israel is that a successful Syria, backed by Turkey, and under Islamist rule, would inspire unrest in Jordan and Egypt, creating a single, Muslim Brotherhood-led bloc all around its borders. A strong Syria would also eventually dominate Lebanon again, as was the case from 1976 to 2005. This would be a far greater threat than Iran.
Jordan itself, however, despite its domestic crackdown on the Muslim Brotherhood, seems to disagree with this assessment, and is trying to build better relations with Shara’, having restarted flights to Aleppo. Jordan may calculate that it must do so to manage Turkish influence in Syria, rather than commit itself too early to a conflict that may prove unnecessary, and which would risk instability in Jordan itself, given the Brotherhood’s power.
Iran
Meanwhile, Iran is trying to get past its defeat in Lebanon and Syria, preserve its influence in Iraq, and distance itself politically from Yemen. The Americans have no way of invading Iranian territory. Moreover, if they are failing to stop missiles from Yemen, they will never succeed in stopping missiles from Iran in a full scale war.
The USA can inflict enormous damage on Iran’s economy, its ports, its power stations, its energy, and more. However, Iran would retaliate with missile and drone attacks against American companies and assets in the GCC, including energy infrastructure in countries that allow American forces to use their territories.
This balance of deterrence led the two sides to try to negotiate a new nuclear agreement. This may serve Israel’s interests, in that Iran can be a partner in backing the Druse and the Alawites against central Sunni rule, against Turkey. However, Israel’s focus is on the Islamic Republic’s anti-Israel dogma, and the Islamic Republic is focussed on its hostility to Israel, preventing such an outcome. However, some under the table arrangements are conceivable.
Commercial Impact:
As we have explained elsewhere, the Americans are trying to reduce their global commitments to focus on China. They are therefore aiming for deals with Iran and Russia to stop them from being entirely dependent on China, supplying her with discounted national resources in exchange for.
Reaching such deals is a lengthy process, as evidenced by the inability to attain ceasefires in Ukraine, and the complex nature of the Iran negotiations. Israel will do everything it can to obstruct this process, especially for Iran.
The American-Houthi deal highlights the importance of America retrenching and consolidating - if the Americans cannot defeat the Houthi, this casts severe doubt on the ability to defeat Iran decisively, let alone China, in a direct confrontation.
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