Saudi Arabia’s economy is faltering. A Houthi siege could paralyze it

Since then, attention has shifted to the Strait of Hormuz, the only entry and exit gate to the Persian Gulf, but now another turn has been received – with the announcement by Iran’s envoys in Yemen of imposing a naval blockade against Saudi Arabia.

● The renewed escalation in Iran: the scenario that could endanger up to 30% of global maritime trade
● The Greek solution for the future in which Turkey will arm itself with advanced fighter jets

The main customers: Asian countries

The world’s largest oil exporter has already been severely affected by Operation Hare’s Roar, which forced it to reduce its production rate from about 10 million barrels a day between the months of September and February to about 7.7-6.6 million between the months of March and June. The damage resulted not only from the Iranian attacks, but first and foremost from the blockade of the Strait of Hormuz, and the need to transport a limited amount of oil in pipelines to the Red Sea in the west of the kingdom, from which to take the supplies.

This allowed Riyadh’s monthly oil revenues to drop from March to April by about $6.3 billion “only” to about $18.5 billion.

The oil transit at Bab al-Mandab, on the way to the four main oil customers of the Saudis, proved to be critical during the period of fighting for the state’s revenues.

The four importers are Asian countries: China (25.6% of Saudi oil exports in 2025); South Korea (15.8%); India (10.5%); and Japan (10.2%).

Last month, it was evident that the same customers received a response, but through a longer route – in the Red Sea. In June, the Saudis exported about 4.19 million barrels per day through the port city of Yanbu, on its western coast.

The turning point came last week, when at the end of four years of a ceasefire in Yemen that managed to be maintained since 2022, the Saudis attacked the airport in Sana’a, while the Houthis responded by launching ballistic missiles. To this, the Houthi response was added in the spirit of “siege against siege”. Dr. Yoel Gozhansky, head of the Gulf Program at the Institute for National Security Studies (INSS), calls for attention to be directed to the step in Yemen, specifically to Iran.

“The Iranians want to turn Bab al-Mandab into Hormuz 2. This is an important point because Hormuz is impossible to bypass, and they know that Saudi oil flows into the Red Sea. Already in the last two weeks, in the shadow of the situation in the area, there has been a decrease in the volume of traffic in Bab al-Mandab – without the Houthis launching a missile. If the route is closed, the Saudis will be completely harmed.”

The Saudi economy depends on oil

Crown Prince Mohammed bin Salman would be happy if his economy was not still dependent on oil, but that is not the case, including from information coming from Riyadh.

From the data of the Saudi Bureau of Statistics (GASTAT), it appears that Saudi growth stood at 4.5% in 2025, under the influence of a jump of 4.9% at the annual level in the fourth quarter. The clear engine of growth was the oil sector, which jumped in the last quarter of the year by 10.4% on an annual basis, and throughout the year by 5.6%.

The Saudi problem lies in the crown prince’s ambitions to realize Vision 2030, or at least the lion’s share of it. Riyadh’s main goal is to reduce dependence on oil and adapt the economy and infrastructure to those that characterize itself. At the base stands Mohammed bin Salman’s flagship project, the city of the future Neom, which is intended to be spread over 26.5 square kilometers in the northwest of the country. The estimated investment in it, according to the “Oil Price” website, currently stands at about 8.8 trillion dollars.

As reflected in the Saudi growth data, the answer should come from oil. According to the International Monetary Fund’s assessment, Riyadh needs barrel prices of about $90, while the Bloomberg news agency expects a required price of about $94. Therefore, “on paper”, the spike in oil prices during the war to around $115 or about $90 today, should serve the Saudis. Their problem is that if they are denied the possibility to export, they cannot take advantage of the situation.

It should be noted that the low oil price environment that characterized the pre-war, gave its signals on the vision of the flagship of Mohammed bin Salman. As part of a renewed look at the plan that existed even before the war, the luxury yacht island project “Sindala” was stalled and came into question regarding its feasibility; The skyscraper “Makab” was put on hold due to the costs; And the impressive “The Line” city project was greatly reduced.

The Yemeni government will mobilize for a counter-attack

This trend, which in the absence of Saudi oil exports on a reasonable scale could be exacerbated, is the reason why the Yemeni government, which is close to the Saudis, according to a report in Bloomberg, may be sent to help against Houthi attacks on Saudi ships. However, the Iron Swords War illustrated that the Houthis in 28% of the country they control, and especially in the strategic port city of Hodeidah and the capital Sana’a, are enough to disrupt traffic in the Red Sea. A route through which, until that war, approximately 14% of the world’s maritime trade passed.

“The Iranians are preparing for US President Donald Trump’s decision to intensify the fighting against them, by blocking the shipping lane,” explains Aviram Blaish, vice president of the Jerusalem Center for Foreign and Security Affairs (JCFA). “Trump is hesitating, but they are already preparing for a major attack. The Houthi ‘eye for an eye’ issue stems from a desire to build a narrative in which they are the sovereign in the maritime and air space.”

According to Blaish, the directive to close Bab al-Mandab is kept as a sort of last card of the Ayatollah regime in Tehran. “The Iranians and the Houthis are making a pincer movement on the export of Saudi oil. This is more of an Iranian incident than a Houthi issue. Although the relationship of the Islamic Republic with the Houthis is different from the one they manage with Hezbollah, but in strategic issues – the parties are integrated together. In tactics, it is different. In any case, Israel should learn from Iran in its activities in the fields of consciousness.”