Jefferies warns Houthi war with Saudi Arabia threatens oil infra, Red Sea shipping route

The group has also expanded its attacks beyond Saudi Arabia’s East-West oil pipeline to refineries in the western part of the country and Riyadh airport, the report said. Jefferies warned that the conflict is more complicated than the Houthis simply acting as an Iranian proxy and could pose a greater threat to Saudi Arabia's stability than investors assume. Why the Bab al-Mandab Strait matters for oil markets

The Bab al-Mandab Strait is a key shipping route for oil and other goods travelling between the Red Sea and the Gulf of Aden, making it an important link between Asian, European and Middle Eastern markets. Any disruption to traffic through the chokepoint could force vessels to take longer routes, raising freight costs, extending delivery times and adding to pressure on global supply chains. For energy markets, prolonged disruption could also complicate crude oil and petroleum product flows.

The latest concerns come against a backdrop of heightened geopolitical risk in the Middle East. Simultaneous disruption to oil infrastructure and shipping routes could amplify supply concerns and increase the risk of sharp movements in crude prices. Saudi oil infra faces growing risks The Houthis have targeted Saudi Arabia’s East-West pipeline, which has a stated capacity of about 7 million barrels per day, according to the report.

They have also attacked oil refineries in western Saudi Arabia and Riyadh airport several times over the past week. The East-West pipeline is strategically important because it allows Saudi Arabia to transport crude towards the Red Sea, providing an alternative to shipping oil through the Persian Gulf and the Strait of Hormuz. Threats to this infrastructure could limit Saudi Arabia’s ability to redirect oil exports if other regional shipping routes are disrupted.

Attacks on refineries could also affect the availability of refined petroleum products, depending on the extent of any damage and the duration of operational disruptions. The report described these developments as historic, with potentially serious implications. Why Jefferies says the conflict is more than an Iran proxy war Jefferies argued that the Houthis’ motivations and the roots of the conflict cannot be understood solely through the lens of Iran’s regional influence.

The group governs an area of Yemen where about 70 percent of the country’s population of 43 million lives, the report said. It also highlighted Yemen’s historical territorial claims over the provinces of Asir, Najran and Jizan, which Saudi Arabia took control of in 1934. The Houthis have their origins in Zaydi Shia Islam, a tradition dating back to the late ninth century, and maintain cross-border tribal links with these disputed areas, according to the report.

These historical and regional factors, Jefferies argued, make the conflict more complex than a straightforward confrontation between Saudi Arabia and an Iranian-backed group. For markets, the immediate concern is whether the conflict leads to sustained disruption to Saudi oil infrastructure or shipping through the Bab al-Mandab Strait. Prolonged disruption could push up crude prices, freight and insurance costs, adding to inflationary pressures and complicating the outlook for central banks.