Economic and Humanitarian Situation Remains Dire

Driven by the worst funding gap in a decade, a dramatic escalation in operational risks, and stagnant economic performance, Yemen remains among the world’s most food-insecure countries. The latest Food Security Update from the World Food Programme (WFP) paints a dark picture. Severe 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 governorates. The prevalence of inadequate food consumption is converging across areas under Houthi and government control; however, the population is disproportionately distributed, resulting in a substantially larger number of people in need in Houthi-controlled areas. 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 recent deterioration has been driven by a litany of factors, including price hikes due to the regional conflict, reduced purchasing power, and longstanding power outages in government-controlled areas. The latest Integrated Food Security Phase Classification (IPC) projected further deterioration of the food security situation toward the end of 2026 in government-controlled areas, with an estimated 5.4 million people expected to experience severe levels of acute food insecurity. Key drivers include seasonal factors, floods, and a curtailed humanitarian response.

Significant financing shortfalls in humanitarian aid have reduced food consumption nationwide. Humanitarian assistance has been curtailed in 2024-2026 compared to 2021-2023, when large-scale food assistance was provided. Regions under Houthi control have experienced a sharper deterioration of food consumption, 36 percent, versus 27 percent in government areas, with severe food deprivation nearly doubling in Houthi regions over the same period.

The WFP started the implementation of its new targeted emergency food assistance program in government-controlled areas in mid-February, with the third cycle now underway. Due to severe funding shortages, the number of beneficiaries was reduced from 3.4 to 1.7 million people. All WFP operations in Houthi-controlled areas have been suspended since September 2025. Ongoing regional tensions are disrupting supply chains, jeopardizing the WFP’s ability to stabilize food access and driving up the costs of its operations.

The conflict between the US, Israel, and Iran has had dramatic knock-on effects in Yemen, fracturing already fragile supply chains that have led to mounting delays at major ports and driven up the costs and dangers of maritime navigation. Minister of Industry and Trade Mohammed al-Ashwal noted that shipments to Yemen have been significantly disrupted, with many failing to reach their destinations. Although cargo vessels have docked at regional hubs such as Jeddah, Dubai, Oman, and Djibouti, the final leg of their journey to government-controlled ports has been effectively blocked, driving up the cost of basic necessities for an already impoverished population.

While monetary policies enacted by the warring parties have stabilized exchange rates, broader macroeconomic indicators are bleak. Yemen has seen a staggering 60 percent decline in real GDP per capita since the onset of the conflict in 2015, reflecting a deep-seated erosion of purchasing power and productive capacity. Despite the availability of food in local markets, Yemen’s food security crisis is primarily driven by affordability.

The cost of the minimum food basket in government areas increased by three percent from February to May 2026, with vegetable oil recording a 7 percent rise during this period. Price hikes have primarily been attributed to rising global food prices, higher transportation costs due to higher local fuel prices, and surging maritime freight and insurance costs.

In Houthi-controlled areas, there has been a 13 percent increase in the prices of key food items in Sana’a since February, also due to global food prices and higher shipping costs. This comes as these areas suffer from reduced income, a severe erosion of purchasing power, and the removal of humanitarian safety nets due to loss of operational space and funding challenges. Furthermore, the economy in these areas continues to be battered by liquidity constraints, depleting foreign currency stocks, sanctions, and the relocation of banks from Sana’a to Aden. The severe economic downturn in these areas was compounded by US and Israeli airstrikes on Red Sea ports and associated infrastructure last summer. Reduced capacity has continued to constrain trade through these ports, further compounding revenue shortages. According to ACAPS, the degradation of Red Sea ports has resulted in estimated losses of US$ 1.4 billion. To compensate, the group has intensified taxation and seized assets.

Compounding these problems, the closure of the Strait of Hormuz has exacerbated fuel shortages. Fuel imports through the Houthi-controlled Red Sea ports were 73 percent lower between January and May this year compared to the same period in 2025, and down 60 percent through government-controlled ports. Sana’a and other cities in the north have reported low-quality fuel at filling stations, adversely affecting vehicles, power plants, water pumps, and livelihoods. Supply disruptions in government-controlled areas resulted in significant power outages (18–20 hours per day in some districts), with current demand nearly three times higher than available supply. This has worsened living conditions and commercial activity, and created operational challenges for health facilities and other essential services. Fuel prices in government-controlled areas increased by up to 30 percent in May compared to February 2026, reaching their highest level since August 2025, raising the risk of further deterioration in food security through inflationary pressure. Hikes in domestic fuel prices are primarily attributed to surging global crude oil prices and maritime insurance costs. Local fuel prices surged by 40 to 44 percent year-on-year in US dollar terms, highlighting how little the local currency’s appreciation has translated into relief for domestic markets.

Yemen remains vulnerable to regional security risks in the Middle East—specifically the potential for the conflict in the Bab al-Mandab to escalate—which could cut off fuel supplies to a country nearly entirely dependent on external imports. Should such a scenario materialize, it would trigger a surge in the costs of food, essential services, and transportation, exacerbating Yemen’s humanitarian crisis.

In Houthi-controlled areas, fuel prices have remained unchanged, with both gasoline and diesel sold at YR475 per liter. But prices are likely to rise if regional supply disruptions persist. OCHA has reported that “these areas are fully import-dependent for fuel – mainly from Gulf countries – with a substantial portion of Iranian imports arriving at Red Sea ports on shadow tankers.” The continued disruption of maritime trade will negatively impact both areas, particularly as shipping firms have begun imposing additional charges—dubbed “risk fees”—on shipments transiting the Strait of Hormuz. These additional charges, which have reached approximately US$3,000 per 40-foot container, are estimated to increase the cost of importing goods into Yemen by up to 15 percent. This surge in overhead is placing immense economic pressure on both merchants and consumers.

In contrast, imported food has continued to arrive in sufficient volumes, with imports via all Yemeni seaports rising by 21 percent during January-May compared to the same period last year. However, declining purchasing power remains the key challenge to adequate nutrition.

The 2026 Humanitarian Needs and Response Plan reports that 22.3 million people in Yemen need lifesaving humanitarian assistance and protection services, a 23 percent increase over two years. The plan, which requests US$2.16 billion to assist 12 million people, has experienced severe funding shortfalls in recent years. In 2025, OCHA reported that the aid plan received only US$720.3 million, just 29 percent of the requested US$2.48 billion, the lowest level of funding in 10 years. Despite escalating needs, this severe funding shortfall forced all clusters to scale back critical services. As of late June, OCHA data showed that less than 20 percent of the requested funds for 2026 had been secured.

Severe underfunding is expected to continue. This will force aid agencies to further cut critical services, despite Yemen remaining one of the world’s largest humanitarian crises.

Houthis Revoke Over 4,000 Commercial Licenses

In a calculated move to restructure the business landscape in Houthi-controlled areas, 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. These decisions coincided with escalating tensions involving international agencies and organizations operating in areas under the group’s control. By dismantling them, the group aims to further consolidate its economic control and reshape the private sector to favor its own interests.

The measures have impacted entities within the automotive and general manufacturing sectors, as well as those operating in the medical, food, pharmaceutical, and public service sectors. Notably, the campaign targeted long-standing commercial agencies, some of which were established as early as the 1970s. Prominent among these were Isuzu Motors, Jaguar Land Rover, Volvo, and IBM. While the group later granted these agencies a 90-day grace period to regularize their legal status and complete renewal procedures, their owners in Sana’a expressed dismay at the move, saying they had already faced significant hurdles renewing their licenses due to administrative complexities and exorbitant fees. Many had already had their operations suspended by the Houthis before their licenses were revoked. The decision will pave the way for these licenses to be granted to entities affiliated with the group, allowing it to tighten its grip on the arteries of commercial activity, particularly in the critical sectors of imports and distribution.

The Houthis maintain firm control over the capital, Sana’a, which, under the country’s centralized administrative system, still serves as its primary commercial and financial hub. This has facilitated the group’s efforts to replace existing economic actors with its own affiliates, resulting in a substantial number of foreign commercial agencies and associated assets coming under the group’s control. These policies have compelled hundreds of businessmen to flee Sana’a, seeking refuge either in territories controlled by the internationally recognized government or abroad. Many were forced to abandon their corporate holdings and commercial agencies; these assets were subsequently either co-opted by the Houthis or transferred to entities affiliated with the group’s loyalists. For those who remain, the Houthi regime imposes financial burdens under various pretexts—state tax obligations, taxes for the war effort, and mandatory donations for its religious and ideological events.

The decision to revoke the licenses coincides with intensifying policies aimed at localizing production in numerous sectors that currently rely on imports, including the pharmaceutical sector. The group has recently granted licenses to affiliated investors to establish numerous local pharmaceutical factories and companies. According to sources on the ground, hundreds of imported medicines have disappeared from the market, replaced by inferior, locally produced alternatives. The repercussions of this substitution could prove catastrophic for public health, given the absence of quality control, the conditions in local production facilities, and the lack of adequate expertise.

Houthi-led substitution policies have contributed to a contraction in traditional private-sector activity and the exit of long-established companies from the market, leading to a significant outflow of capital from Yemen. The suspension of these agencies threatens the further loss of thousands of jobs in a country already suffering from high unemployment rates and a suffocating humanitarian crisis.

Gas Shortage in Government Areas

The interim capital of Aden remains in the midst of a severe cooking gas shortage that has persisted for nearly four months. This crisis has placed an immense burden on frustrated residents, as dozens of filling stations across the city have shut, claiming their stockpiles are entirely depleted. The few stations that remain operational are overwhelmed, with queues paralyzing traffic on surrounding streets. Hundreds of empty cylinders stand waiting to be filled.

The repercussions have also manifested in several other cities. Hadramawt’s Mukalla has faced severe shortages, mirroring the situation found in Aden. Even Marib, the sole producer and primary supplier of cooking gas for government-controlled areas, has been affected by scarcity. Citizens have accused fuel stations of monopolizing supplies and artificially creating bottlenecks for profit. The high prices have made cooking gas unaffordable for the majority of households in affected areas.

The crisis stems from a combination of supply shortages, rising demand, failing distribution networks, and rampant profiteering. Supplies are also affected by smuggling, driven by sharp price disparities between Yemen’s regions, even within government-controlled areas. The government has also been slow to mount a coherent response. Compounding the logistical failures is the breakdown in security along supply routes. Tribal factions have repeatedly targeted gas tankers from Marib. At the beginning of April, armed tribal groups in Marib prevented tankers from Safer from proceeding to markets, including Aden. A few days later, military forces successfully intervened to lift a tribal blockade in Marib’s Ghwayriban area and allowed trucks to begin moving again, but recurring tribal clashes and blockades have continued to disrupt supply routes.

Scarcity is also driven by the rising demand for cooking gas, due to its use as an alternative to the even more expensive imported petrol and diesel. Aden has seen a significant surge in demand, driven largely by the transport sector, where estimates suggest that approximately 80 percent of private vehicles and taxis now operate on gas. The findings of a field survey conducted between May and June 2025 indicated that 36 large-scale establishments, including hotels, commercial centers, restaurants, and factories, had begun relying on gas. During the same period, approximately 1,800 vehicles were converted to run on gas, while an additional 775 new gas-powered vehicles entered the city. These figures represent only a fraction of the broader picture of growing demand.

Even where supplies are sufficient, the government’s efforts to address the shortage have been undermined by a lack of oversight. There are currently no effective regulatory mechanisms to manage or monitor gas distribution across the value chain, allowing the crisis to persist despite available resources. The deep-seated imbalances within the distribution system create incentives for smuggling, and price gaps between regions incentivize the diversion of essential fuel for arbitrage. In Marib, a gas cylinder costs approximately YR5,373. By the time that same cylinder reaches Taiz, the price jumps to YR7,973, allowing illicit networks to profit by rerouting gas intended for local residents to areas where it can be sold at a premium. The crisis is further complicated by the massive price difference between government-subsidized gas and the liberalized prices in Houthi-controlled areas. While the government maintains some of the lowest gas prices globally, this is effectively fueling the black market in the north.

On April 9, Aden Governor Abdelrahman Sheikh issued another official directive, mandating the immediate closure of all workshops in Aden that specialize in converting vehicles to run on cooking gas, citing public safety. He directed officials at the local offices of Industry and Trade, the police, and the district Directors-General to conduct field inspections and hold violators accountable. It is unclear how or whether such measures will affect the overall picture of continued shortages across much of the country.

Government Struggles to Implement Economic Reforms

The internationally recognized government is under immense pressure to implement long-awaited economic reforms. In April, the head of the Presidential Leadership Council (PLC), Rashad al-Alimi, held a mini-cabinet meeting attended by government ministers and governors. Topics included implementing the economic, financial, and administrative reform program; revenue mobilization; strengthening governance mechanisms; and providing essential services, including electricity, water, roads, healthcare, and education. The meeting also covered ways to improve coordination between central and local authorities.

They also discussed local authorities’ efforts to close unlicensed checkpoints, ports, and border crossings (see Military and Security). This comes as part of a government drive to combat smuggling, terrorist financing, and organized crime. Despite past efforts to strengthen revenue mobilization and ensure that public agencies deposit revenues into the government’s account at the central bank, the government has failed to enforce this effectively.

The government has continued its heavily subsidized services and limited collection of electricity bills. Cities under government control remain prone to prolonged blackouts. Electricity cuts have worsened with the onset of summer, as power consumption increases. In Aden, the energy production gap has widened to a critical level, with the deficit reaching approximately 400 megawatts during peak hours, despite reduced transmission losses.

Govt Liberalizes Customs Rate

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.

The decision increased the customs dollar rate from YR750 to YR1,550 per US$1. In a cabinet meeting in Aden, Prime Minister Shaya al-Zindani said that liberalizing the customs exchange rate would allow supply and demand to determine import duties and help unify revenue streams, correct price distortions, and boost the efficiency of public resource collection. However, by applying this new policy exclusively to luxury and non-essential goods, the government can limit its impact on essential commodities, which are particularly sensitive to fuel price spikes. This is critical to allay concerns of broader potential impact on imported commodity prices and household living costs. Overall, the measure’s success will depend primarily on the government’s ability to enforce oversight, consolidate revenue streams for government accounts, and address poor revenue collection and widespread tax evasion resulting from years of war.

The policy shift comes amid a severe economic and financial crisis in government-controlled areas. The situation has worsened drastically since late 2022, when Houthi attacks on export terminals forced the suspension of oil exports—the state’s primary source of foreign currency and public revenue. The resulting fragmentation and economic instability have distorted market prices and stripped the state of vital funds. While previous reform attempts were derailed by political friction and institutional divisions, a turning point occurred early this year when Saudi Arabia intervened to sideline the STC and reconfigure the balance of power in government-controlled areas. This latest set of moves comes as part of the implementation of PLC Resolution No. (11) of 2025, concerning comprehensive economic reform priorities, including the liberalization of the customs dollar exchange rate, ending fiscal leakage, and enhancing the efficiency of public resource collection.

Slight Improvement in Electricity Services

In Aden and other cities under the control of the internationally recognized government, 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 PLC, and the provision of a Saudi emergency fuel grant.

The release of a US$150 million Saudi emergency fuel grant to meet the operational needs of power plants in government-controlled areas has provided relief. Blackouts have reportedly been cut to six hours for every two hours of supply. The grant is being implemented under an integrated governance and oversight mechanism managed by a high-level committee reporting to the prime minister and is intended to provide diesel and mazut to several power stations in Aden, including Al-Mansoura, Al-Hiswa, Shahinaz, and Al-Mal’ab. It is the second Saudi support initiative since the year began, following a US$81.2 million grant to pay for approximately 339 million liters of diesel and mazut from the PetroMasila fields in Hadramawt. While the recent fuel grant aims to secure fuel derivatives for power plants through the end of 2026, it is an ad hoc solution that can only provide a temporary respite. Years of neglect and lack of investment in electricity infrastructure have contributed significantly to the current situation.

Other measures to address the crisis are being taken, too. Emergency power generation units arrived in Mukalla in late June, while others designated for Aden are still en route from the Saudi port of Jeddah, according to government sources. They are part of a project to install emergency power stations for the cities of Mukalla and Seyoun, with a combined capacity of 200 megawatts. The project is funded by the Saudi Development and Reconstruction Program for Yemen (SDRPY), and the Gulf International Energy Company will install the generators and connect them to the grid. Another shipment of generators with a total capacity of 100 megawatts is expected to arrive in Aden soon, though it could take up to two months for the generators to come online. From a technical standpoint, establishing mazut-fueled power plants requires extensive engineering and construction. According to a source, this includes site preparation and the installation of fuel tanks, cooling systems, transformers, and transmission and grid-connection networks, alongside comprehensive infrastructure.

Since May, Aden, Hadramawt, and other areas had endured up to 20 hours without power each day. Aden has been roiled by a series of demonstrations, and last summer saw similar protests as blackouts and living conditions became unbearable. The government has faced a barrage of criticism for its handling of the problem, with accusations of mismanagement and a lack of transparency in the electricity sector. The government claims to spend US$100 million a month on fuel and power plant rentals, but is still unable to provide reliable electricity.

Central Bank Readies Launch of National Payments and Clearing Company

The CBY-Aden is preparing to launch the Yemen Payments and Clearing Company (YPCC), as part of efforts to modernize the country’s financial and banking infrastructure and foster digital transformation within the financial services sector. Funded by the World Bank and implemented by the United Nations Development Programme (UNDP), the entity will operate as a joint-venture subsidiary of the CBY-Aden, featuring equity contributions from Yemeni banks. It aims to facilitate clearing operations between banks and electronic wallets, accelerate financial transfers, enhance the efficiency of payment systems, and foster greater integration among financial and banking institutions. The CBY-Aden issued an official license to establish the company in mid-May, but it may take several months to launch the platform and commence operations.

The YPCC initiative falls within a broader framework of efforts to modernize the banking sector and accelerate digital transformation. In mid-2025, the World Bank approved US$30 million in new grants, with US$20 million allocated to the Yemen Financial Market Infrastructure and Inclusion Project through three main components: developing a Fast Payment System (FPS); developing a Real Time Gross Settlement System (RTGS); and upgrading the Core Banking System for the CBY-Aden and supporting access and usage of payment infrastructure.

The development of Yemen’s financial infrastructure would provide opportunities to improve financial inclusion and is essential to increasing the use of digital financial services, including digitizing government payments. Yemen’s lack of a comprehensive core payments infrastructure has limited the government’s ability to digitize payments, including public-sector salaries and social transfers. In late 2023, the government issued several decrees in an effort to digitize salary payments. To complete this process, the government must continue its reforms and create a database of civil servant pay within the banking system. The availability of an FPS would enable banks and other financial services providers to operate in an integrated financial system in government-controlled areas. Through the FPS, individuals and enterprises would have an avenue to exchange funds more efficiently and bypass traditional payment options, which are limited to cash, checks, or electronic payments within the same financial institution. The relaunch of an RTGS for large-value financial transactions aims to improve the efficiency and security of retail payment systems, mitigate financial risks, and ensure the secure settlement of inter-institutional obligations.

However, interoperability among Yemeni financial service providers remains a challenge, as the conflict has divided the country into two distinct economic zones. Houthi authorities have adopted their own FPS, which operates solely in areas under the group’s control through a privately owned entity.

Public Prosecutor Orders Freeze on STC Assets

The protracted conflict between the internationally recognized government and the officially dissolved Southern Transitional Council (STC) has spread to a battle over the group’s finances. In a bid to systematically cripple the STC, the government has deployed a series of measures to cut off the group’s funding and halt its remaining operations.

In mid-June, the Public Prosecutor in Aden issued a decision to provisionally freeze all funds and accounts belonging to the STC at banks, financial institutions, and exchange companies. The move is part of a series of measures purportedly intended to “protect public funds, combat corruption and money laundering, and enable the government to access all its domestic and sovereign resources.” The decision bans the disposal, assignment, withdrawal, or transfer of the frozen funds. The Central Bank of Yemen in Aden (CBY-Aden) subsequently issued instructions to commercial banks, financial institutions, and exchange companies, ordering them to immediately report any accounts, balances, or funds held on behalf of the STC.

The decision led to the immediate freezing of YR14 billion held in an STC account at the Cooperative and Agricultural Credit Bank (CAC Bank). The STC’s Financial Department did not dispute the amount but asserted that the funds do not belong to the STC or its leadership, and instead represent food allowance entitlements for Southern military and security forces for October and November 2025. The Financial Department of the Southern Armed Forces described the allegation that the STC and its exiled president, Aiderous al-Zubaidi, owned the funds as a baseless “disinformation campaign.” The STC accused what it called the “Saudi tutelage authorities” of orchestrating the seizure, and argued that it was intended to target Southern forces and deprive them of financial entitlements at a time when they were engaged against the Houthis and other extremist organizations.

The STC’s leaders accumulated massive wealth during their tenure in power. By dominating lucrative sectors of the economy and exploiting the black market, they secured substantial financial windfalls. Their ownership of domestic banks and money exchange companies enabled them to easily move capital abroad or launder it locally by distributing the funds to trusted actors and loyalists on the ground.

Yemenia Suspends Flights

In late May, Yemenia Airways announced the suspension of all domestic flights to and from the Socotra Archipelago and between Seyoun and Cairo. The decision stemmed from a nationwide shortage of aviation fuel. In a statement, the national carrier’s office in Socotra reported that a lack of fuel made it impossible to continue operating domestic flights according to previously approved schedules, compelling the company to suspend them. The service is the sole link connecting the archipelago’s residents to the rest of Yemen.

The airline has attempted to alleviate the shortage by refueling planes at airports abroad. On international flights bound for airports such as Cairo, Amman, and Jeddah, aircraft fill their fuel tanks—carrying quantities that exceed the requirements of the return journey. The airline has thus been forced to prioritize international routes over domestic ones, leading to the suspension of the domestic route to Socotra and the postponement of other flights.

Relying on foreign airports for fuel inflates operational costs, but there are a few other options. The fuel shortage is intertwined with security instability in the Strait of Hormuz, which has led to supply chain disruptions and record-high shipping and marine insurance costs. Consequently, the crisis may be difficult to resolve. While Saudi Arabia has announced a new fuel grant for Yemen valued at US$150 million, the derivatives are designated exclusively for electricity generation and mitigating power outages. There has been no accompanying allocation of jet fuel for the aviation sector.

SFD Under Fire: The Cost of Insecurity

The operational environment for aid and development in Yemen came into sharp focus following the May assassination of Wissam Qaid, Acting Executive Director of the Social Fund for Development (SFD). Qaid’s assassination represents a severe blow to one of the country’s most vital institutions and signals the deepening erosion of the security environment in which relief and development organizations operate. The SFD was one of the main entities to absorb and channel international aid — the World Bank contributed 40 percent of its budget over the past two years — and deteriorating security could further undermine donor confidence in the internationally recognized government. The SFD has long been regarded as one of the most effective development instruments in the country, a view that persisted even amid the collapse of state institutions, as it continued to operate with neutrality and deliver services across Yemen.

Still, the SFD has been the subject of significant disputes between the government and Houthi authorities, particularly following the relocation of its headquarters from Sana’a to Aden last August. Sources from the organization told the Sana’a Center that the relocation was an urgent necessity following the designation of the Houthis as a Foreign Terrorist Organization, and that operating from Sana’a was becoming increasingly untenable, particularly after major banking operations were transferred to Aden.

The assassination drew widespread condemnation from the local and international communities. The United States, the UK, France, the EU, and the UN all issued statements condemning the killing and reaffirming the state’s obligation to protect development workers. The PLC convened a meeting in the aftermath of the killing and pledged to strengthen security protocols, but the underlying problem, a lack of unity and coherent security decision-making in Aden, remains unresolved.

With Aden increasingly serving as the hub for banking, development, and humanitarian operations, the imperative to enforce the rule of law there has become urgent.

Contaminated Fuel Paralyzes Transport in Houthi-Controlled Areas

Sana’a and other cities under Houthi control suffered from a crisis caused by contaminated fuel over the course of June. Widespread public outrage erupted following the influx of large quantities of adulterated fuel. The fuel has caused extensive damage to vehicles, irrigation pumps, factories, workshops, and power stations, prompting demands for compensation for those affected.

The Sana’a-based Yemeni Petroleum Company blamed the situation on a lack of available infrastructure, saying that its oil storage tanks were completely destroyed by last year’s US and Israeli airstrikes, forcing the use of alternative tanks that do not allow for the settling of impurities or proper fuel purification. A US-imposed ban on fuel shipments to the Houthi-controlled port of Hudaydah has also played a role. US Treasury sanctions specifically targeted private oil companies acting as fronts for the group to smuggle fuel. The Houthis have since utilized cross-border networks to import low-quality Iranian oil to meet demand and stockpiled it at facilities in the Al-Sabah area west of the capital. Recent escalation in the Middle East and disruptions to maritime traffic through the Strait of Hormuz have further constrained the flow of fuel, including shipments linked to Iran.

This is the second such incident of adulterated fuel circulating in the market in the past year, and the Houthi-controlled Yemen Petroleum Company faces accusations of deliberately distributing fuel mixed with other substances. Media sources, citing experts in data verification and vessel tracking, reported that the affected fuel shipments underwent illicit ship-to-ship transfer in the Mediterranean Sea before entering the Ras Issa oil terminal in Hudaydah. Even with a trickle of imports, the situation was dire. Faced with rising demand and difficulties importing fuel, several shipments of contaminated fuel were released into the supply chain. Prolonged storage of low-quality fuel derivatives leads to degradation, the formation of impurities, and the accumulation of water and moisture, contaminating the fuel.

The stored shipments primarily belong to traders and influential figures within the group. The fuel is released daily to service stations, generating profits for these figures while the public bears the cost.

Houthis to Auction Seized Bank Assets

In mid-May, the Houthi-aligned Specialized Criminal Court in Sana’a scheduled an auction to sell land belonging to Al-Tadhamon International Islamic Bank, one of the largest private Yemeni banks measured by its deposits and assets. Set for May 16, this marked the largest such auction to date, covering a total area of 2,792 libna (approximately 124,000 square meters), at an estimated value of YR9.4 billion (approximately US$17.6 million). However, the outcome of the auction remains unclear.

In response to the announcement, the CBY-Aden issued a statement warning of local and international sanctions against any individuals or entities involved in the Houthis’ illegal appropriation and sale of real estate or assets belonging to banks and financial institutions. The CBY-Aden emphasized that “any agreements, sales contracts, transfers of ownership, mortgages, or other transactions resulting from such actions are invalid and illegal, issued by entities designated as terrorist organizations, and expose their owners to the loss of their financial rights and full legal accountability.” The central bank added that any direct or indirect participation in such actions would subject participating individuals and entities to legal accountability and the risk of being placed on local and international sanctions lists.

The proposed land auction comes as part of political litigation against the late former President Abdo Rabbu Mansour Hadi. The process stems from a 2019 death sentence and confiscation order issued by the Houthi-controlled Specialized Criminal Court. In mid-2021, the Houthi authorities intensified pressure on Al-Tadhamon Bank, demanding the transfer of over YR32 billion and 636.2 million Saudi riyals from Hadi’s frozen accounts to the Central Bank of Yemen in Sana’a (CBY-Sana’a). Al-Tadhamon Bank has formally contested the transfer, citing a direct conflict with UN Security Council mandates. The bank noted that the International Sanctions Committee expressly prohibits acting on orders from Houthi-aligned judicial bodies, warning that such transfers could be classified as money laundering and terrorist financing. The bank also clarified the nature of the assets: the Yemeni rial holdings were previously invested in Islamic Sukuk bonds with the central bank, while the Saudi riyal holdings constitute an investment account tied to external agreements dating back to 2014.

This auction, the second of its kind, is part of the Houthis’ broader strategy to seize and confiscate the properties of opponents who challenge their authority under various pretexts, including accusations of treason. Since 2017, they have implemented a sweeping campaign for looting hundreds of opponents’ homes, real estate properties, and businesses, using state institutions such as the judiciary and the CBY-Sana’a to execute provisional seizures.

Rial Remains Stable

The new Yemeni rial 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 remained below YR1,700 since August of last year. This resilience can largely be attributed to the implementation of aggressive government reforms focused on disciplined management of foreign currency reserves and the strategic prioritization of funds for essential commodity imports.

In addition, financial support from Saudi Arabia, including the payment of public sector salaries, fuel grants for power generation, and development funding, has played a crucial role in stabilizing the currency. In late May, Saudi Arabia announced a US$150 million fuel grant to the internationally recognized government to operate power stations. On June 19, the Kingdom announced it would disburse more than 224 million Saudi riyals (approximately US$60 million) to help cover the government’s budget deficit. Provided as part of an economic support program through the SDRPY, this money is primarily intended to cover public sector salaries.

In Houthi-controlled areas, the price of the old rial remained relatively flat, trading between YR531-534 per US$1 over the second quarter of 2026.