Executive Summary

Military and Security

The arrival of two Iranian aircraft in Houthi-held Yemen in early July triggered a rapidly escalating confrontation, leading to Saudi-Houthi exchanges of fire on a scale not seen since the 2022 truce. The Houthis announced a naval blockade against Saudi Arabia, claimed attacks on three ships in the Red Sea, and targeted Saudi airports and oil infrastructure. In response, Yemeni government forces targeted runways at Sana’a Airport, while Riyadh launched strikes against Houthi military and telecommunications sites on the coast of Hudaydah.

Between April 1 and 6, the Houthis launched four missile and drone attacks toward Israel in what they framed as solidarity with Palestine, Iran, and other members of the Axis of Resistance. The Houthis paused attacks on Israel following a ceasefire between the US and Iran on April 8, but resumed on June 8 as the US-Iran war stumbles on.

Between April and June, regular low-level fighting was reported on frontlines in Marib, Taiz, Hudaydah, Lahj, Al-Dhalea, Abyan, and Shabwa, but no significant territory changed hands. Recent weeks have seen an influx of Houthi and pro-government reinforcements to frontlines across Yemen, as the sides brace for a possible return to full-scale fighting.

Piracy has reemerged in the waters off Yemen’s coast. A successful hijacking and a series of armed approaches during May and June indicate that, beyond the Houthis’ announced blockade, vessels face other threats when transiting the Gulf of Aden and Arabian Sea.

The Saudi-led restructuring of the Yemeni government’s military and security apparatuses has continued with a broad revamp of commands, personnel systems, and revenue networks once controlled by the secessionist Southern Transitional Council (STC) or formerly under UAE patronage. The restructuring has seen a number of commanders dismissed from their positions, others grow closer to Riyadh, and still others pushed into hiding, as Saudi officials and the government work to dismantle the STC’s remaining military structures.

Wissam Qaid, Acting Executive Director of the Social Fund for Development, was assassinated in Aden on May 3, in a shocking attack felt throughout the development and humanitarian community. Qaid’s murder came on the heels of the assassination of Abdelrahman al-Shaer, Chairman of the Board of Al-Nawras Model Schools and an important figure in the Islah party.

Politics and Diplomacy

On May 14, Houthi and government representatives signed an agreement for the largest prisoner exchange in the conflict’s history. The deal will reportedly involve 1,680 total detainees, with the Houthis agreeing to release 580 prisoners in exchange for 1,100 Houthi-affiliated detainees held by government forces and Saudi Arabia. The initially agreed exchange date has now passed amid mutual recriminations, though the UN has said both sides remain committed to its completion.

In late June, the Al-Rayyan area in Al-Jawf governorate witnessed the start of one of the largest tribal gatherings Yemen has seen in recent years, prompted by a call from sheikh Hamad bin Fadgham for tribesmen to rally in his support to protest violations he said were committed against him by the Houthis.

The STC is making something of a comeback in Yemeni politics, following its disastrous attempt to seize control of Hadramawt last December. The group retains substantial domestic support, and has reopened local party headquarters across the country, organized numerous rallies in support of southern secession, and become increasingly critical of the role played by Saudi Arabia. The group’s ability to drum up anti-Saudi sentiment has been bolstered by electricity and fuel shortages and the postponement of a Southern Dialogue to address the grievances and political aspirations of the South.

The Public Prosecutor in Aden announced it would freeze all funds and accounts belonging to the STC at banks, financial institutions, and exchange companies. The Central Bank of Yemen in Aden (CBY-Aden) subsequently ordered financial institutions to immediately report any accounts or funds held on behalf of the STC.

Former Yemeni president Abdo Rabbu Mansour Hadi died on May 28. Dozens of Yemeni political figures and foreign leaders offered their condolences for his passing, and the government declared a period of national mourning. Hadi was buried in Riyadh.

The Economy

The latest Food Security Update from the World Food Programme reports that food deprivation affected 36 percent of households in May, up from 31 percent in April. Inadequate food consumption rose to 62 percent nationwide, with all governorates surpassing the “very high” threshold of 40 percent, with the highest rates recorded in Lahj, Shabwah, Hadramawt, Al-Dhalea, and Abyan. Approximately 10 percent of households in Houthi-controlled areas and 8 percent in government-controlled areas reported that at least one member went an entire day and night without eating.

The Sana’a-based Ministry of Economy, Industry, and Trade revoked the licenses of 4,225 established commercial agencies, which serve as the legal local representatives for foreign companies. By dismantling them, the Houthis aim to further consolidate their economic control and reshape the private sector to favor affiliated interests.

Aden remains in the midst of a severe cooking gas shortage. The few stations that remain operational are overwhelmed, with queues paralyzing traffic on surrounding streets. Hundreds of empty cylinders stand waiting to be filled. Mukalla and Marib have also been affected. The high prices have made cooking gas unaffordable for the majority of households in affected areas.

In mid-May, the internationally recognized government approved a new package of economic and financial measures. These included liberalizing the customs exchange rate for non-essential goods, raising diesel prices, increasing the cost-of-living allowance for civil servants by 20 percent, and releasing past-due annual bonuses for public sector employees

In Aden and other cities under government control, electricity supplies increased slightly starting in mid-June. The improvement follows the launch of an emergency plan by the Ministry of Electricity and Energy and the Presidential Leadership Council, and the provision of a Saudi emergency fuel grant.

The price of the new Yemeni rial, which circulates in government-controlled areas, remained relatively stable throughout the reporting period, trading at YR1,573 per US$1, before strengthening by nearly one percent, to YR1,562 per US$1, at the start of June. The currency has now remained below YR1,700 per US$1 since August of last year. In Houthi-controlled areas, the price of old rials remained relatively flat, trading between YR531-534 per US$1.