Yemen opens offensive on Houthis, who claim Aramco strikes; oil's early jump fades

Yemen's Saudi-backed government said on Sunday it has begun an offensive to retake every area held by the Houthis, who said hours later that they had fired missiles and drones at Saudi Aramco sites in Riyadh and Khurais, a claim Saudi Arabia had not confirmed as Brent crude briefly topped $103 a barrel before slipping back.

Yemen's long war just changed shape. President Rashad al-Alimi, who heads the Saudi-backed Presidential Leadership Council, used a televised address on Sunday to order the country's armed forces to begin "military operations to restore the remaining territory of the Republic," and said they would press on "until the country is liberated from the grip of the terrorist Houthi militias." A military spokesman then called on the Houthis to lay down their weapons.

Alimi, speaking from Riyadh, said the decision came only after every chance to de-escalate had been exhausted, and he thanked Saudi Arabia for its support. Regional and Western officials had said earlier in the week that Saudi Arabia was preparing to lead the air campaign while Yemeni forces fought on the ground, a plan TickerGrove covered on Friday. Sunday's speech turns that plan into a declared offensive. How it goes is not yet known.

What the Houthis say they hit

The Houthis answered within hours. In a video statement, military spokesman Yahya Saree said the group carried out two operations with ballistic missiles and drones against Aramco, one in the capital and one in the oil-rich Khurais area to the east. "Both operations successfully achieved their objectives," he said. "The strikes were precise, causing large fires at the targeted sites." He called the attacks retaliation for 50 Saudi-led air and missile strikes over the previous 12 hours on Sanaa and the provinces of Al-Jawf, Taiz, Amran, Hajjah and Saada, and threatened more strikes on Saudi oil facilities until those attacks stop and what he called a blockade on Yemen is lifted.

Those are the group's claims. Saudi authorities and Aramco had not commented on them by late Sunday New York time, and no independent account of damage at either site had emerged. Riyadh has pushed back on similar claims before. After the Houthis said on Saturday that they had targeted the Saudi capital, coalition spokesman Maj. Gen. Turki al-Maliki called the claim misleading and said the group's losses around Taiz were driving it "to seek illusory victories." Smoke and flames were reported at an Aramco facility south of Riyadh that same day.

Why the oil spike faded

Oil traders reacted first and then thought better of it. Brent crude climbed above $103 a barrel earlier in Monday's Asia session, Sunday evening in New York, as Yemen launched its bid to retake Houthi-held areas. The move did not hold. By 0115 GMT, or 9:15 p.m. Sunday in New York, Brent was down 35 cents, or 0.34%, at $101.90, and U.S. West Texas Intermediate was down 62 cents at $90.49. Around 10:15 p.m. New York time, Brent futures traded near $101.50, about 0.7% below Friday's $102.25 close, with WTI near $90, down about 1.2%.

Supply explains most of the shrug. Group of Seven governments agreed on Friday to release 100 million barrels of crude and diesel from emergency stocks, and shipping data showed Middle East crude exports running above pre-war levels on four of the seven days in the last week of September. Tim Waterer, chief analyst at KCM Trade, pointed to the reserve release and Saudi export volumes moving back toward pre-war levels. "That combination is enough to subdue prices for now even though the risks of further damage to energy infrastructure around the Gulf region haven't gone away," he said.

Geography is why the market cares at all. The Houthis' surprise advance last month gave them the Bab el-Mandeb Strait and roughly 90 miles of Red Sea coast. The strait is the southern exit of the Red Sea, on the shipping route between the Mediterranean and Asia, and it has taken on more importance this year as an alternative to the Strait of Hormuz, where Iran has choked oil traffic during the U.S.-Israeli war that began in February.

A fight already under way

Alimi's announcement formalizes fighting that had already escalated. Government forces said they carried out 257 targeting operations on Saturday against Houthi positions from Sanaa and Saada to the fronts at Al-Jawf, Marib, Al-Bayda and Lahij, with most of the effort around Taiz, and the coalition reported 97 more around Taiz and the Tor al-Baha front early Sunday. Those counts come from the government and the coalition and have not been independently verified.

On the ground, the Houthis still have momentum. Three Yemeni military sources said on Sunday that Houthi fighters had cut the main supply road between Taiz and Aden, effectively encircling Taiz, the country's third-largest city, where hundreds of thousands of civilians live and thousands of government troops are stationed. Alimi is from the region. The World Food Programme said last week that three in four families in parts of Yemen are going hungry as the fighting displaces tens of thousands of people.

Saudi Arabia entered Yemen's war in 2015 and failed to dislodge the Houthis, who have held Sanaa since 2014. A 2022 truce largely held until this year, when the group began attacking Saudi shipping and oil infrastructure as the Iran war spilled over. The United States is already providing intelligence to support Saudi operations in Yemen, according to people with knowledge of the preparations.