Red Sea and GCC Risk Update
The US gives escalation signals, but the UAE and Saudi Arabia are not on board.
President Donald Trump re-designated Ansar Allah (the Houthi) as a terrorist organisation on his second day in office.
Previously, StarLink, Elon Musk’s satellite company, had announced that its first presence in the Middle East would be in Yemen. This is not a commercial decision. Rather, StarLink is used by Ukrainian forces as their main means of communication. The company’s deployment in Yemen signals the US’ intent to back local proxies into a renewed conflict.
Transformed region
We had highlighted how the Turkish victory in Syria transforms the Middle East in the pieces below (you should read them and become a paid subscriber).
As part of this transformation, we foresee more Iranian-Saudi cooperation against Turkey. The Turks threaten Iranian interests in Iraq, as well as the religious and popular legitimacy of the Al Saud. The logic of the new Iranian administration, which is preparing for Ali Khamenei’s succession, is to build up the Iranian state, not the Iranian revolution. It is therefore unclear what backing it would give to the Houthi.
Iran has had a connection to Yemen since before Islam, reflecting the importance of the country to Iranian national security. However, the Houthi are uncontrollable and may have become a risk to Iranian cooperation with Saudi Arabia, and to a new potential Iranian-US deal.
Moreover, part of the Iranian strategy pre 7 October 2023 was to support the autonomous development of capabilities in its proxies, including missile manufacturing and supply chains, while retaining some command and control over strategic assets. Meaning that Ansar Allah will have some independent capabilities regardless of Iran (obviously, they would be far more effective with Iranian support).
Last, Russia also has a stake in Yemen, as does China. Both want to keep the US Navy in the Red Sea, not on their doorstep, and want to absorb lessons from Ansar Allah’s confrontation with the US.
Forecast and Commercial Implications:
The US is signalling that it is corralling its regional allies and Yemeni forces into attacks against the Houthi.
Trump being Trump, he will first try to negotiate with the Houthis by intensifying sanctions - such as through the terrorist designation - and by putting other, non-military pressure, such as an enhanced blockade, onto the Houthi.