Executive Summary

The Houthi group (Ansar Allah) resumed attacks on Israel on July 6, following a lull during the 12-day Israel-Iran war. Drones and missiles repeatedly targeted Ben Gurion Airport and the southern port city of Eilat, along with energy and military infrastructure across central and southern Israel. On August 22, the group used cluster munitions in a missile warhead for the first time.

The Houthis also restarted attacks on Red Sea shipping, firing on and sinking two Greek-owned commercial vessels, the MV Magic Seas and Eternity C, on July 6 and 7. Four people were killed, and ten are now hostages; one is missing and presumed dead. On September 29, the Houthis hit the Dutch ship Minervagracht with a cruise missile, killing one crew member and prompting the Netherlands to call for the EU to designate the group as a terrorist organization.

Israel responded to Houthi missile and drone attacks with an escalating series of airstrikes. The ports of Hudaydah, Ras Issa, and Al-Salif were repeatedly targeted, along with energy and industrial infrastructure and military and political targets in Sana’a. On August 28, Israel assassinated Houthi-appointed Prime Minister Ahmed al-Rahawi and eleven ministers and cabinet officials in an airstrike. Houthi military chief of staff Mohammed Abdelkarim al-Ghamari was also killed. Further strikes targeted media offices and military headquarters in the city.

On September 9, Israel bombed the Qatari capital Doha, seeking to eliminate senior Hamas negotiators. The attack in Qatar, a US ally that hosts an important American military base, caused shock and alarm among Gulf countries, which roundly condemned the strike.

The assassination of Taiz official Iftehan al-Mashhari on September 18 led to widespread condemnation and protests, with demonstrators demanding an end to lawlessness and corruption by local armed groups. The 170th Air Defense Brigade, which has a history of involvement in criminal activity, was implicated in the murder. Fallout has put pressure on the Islah party, which wields significant influence in the city.

In early August, a boat carrying around 170 migrants, mostly Ethiopian nationals, capsized off the coast of Abyan. Forty-two people were rescued, but at least 86 died. A large search-and-rescue operation was launched following the incident.

Internal divisions continue to plague the Presidential Leadership Council (PLC). A spat over unilateral appointments by Southern Transitional Council (STC) chief Aiderous al-Zubaidi highlighted his growing rivalry with fellow PLC member Abdelrahman al-Muharrami and the diverging agendas of of the council. The STC has been under increasing domestic pressure due to deteriorating public services in areas where it holds influence.

On July 28, protests broke out in Hadramawt’s capital, Mukalla, sparked by severe power outages. Unrest spread to Wadi Hadrwamawt, where one demonstrator was killed. Poor service provision and political divisions in the oil-rich eastern governorate have created tensions between Hadramawt Governor Mabkhout bin Madi, Deputy Governor and Hadramawt Tribal Alliance leader Amr bin Habrish, the STC, and the PLC.

The World Food Programme (WFP) reported that Yemen’s food security situation continues to deteriorate, with 62 percent of surveyed households not having adequate access to food in August, despite an 8 percent month-on-month improvement. Twelve percent of households in government-controlled areas and 18 percent of households in areas under Houthi control had at least one member who went 24 hours without food.

Yemen’s internationally recognized government remains in the grips of a severe fiscal crisis, limiting its ability to meet its spending obligations. Army units have gone unpaid since June, and civil servants have not received their salaries since July. Long-awaited Saudi financial support, amounting to 1.38 billion Saudi riyals (approximately US$368 million), was announced on September 20 but has not yet been provided.

The new rial, which circulates in government-held areas, experienced significant fluctuation, hitting a record low of YR2,903 in July before rebounding and closing the period trading at YR1,632 per US$1. The dramatic rebound was driven by aggressive intervention from the Central Bank of Yemen in Aden (CBY-Aden), which tightened its control over the foreign currency market by suspending and revoking the licenses of numerous money exchange outlets and financial transfer networks accused of engaging in illicit currency speculation.

The CBY-Aden also pushed for the institutionalization of import financing, culminating in the establishment of the National Committee for Regulating and Financing Imports in mid-July. In early August, the central bank further tightened access to hard currency and prohibited the use of foreign currency for all commercial and service transactions and financial contracts.

Food and fuel prices witnessed a sharp decline in government-controlled areas following the rial’s recovery. Price reductions in Aden ranged between 20 and 40 percent for basic food commodities, and local authorities conducted monitoring and inspection campaigns to ensure prices aligned with official price caps. Socotra was the exception, where prices for petrol and diesel set by Emirati companies far exceed prices elsewhere.

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued two new rounds of sanctions targeting Houthi revenue streams, procurement networks, and illicit trading, particularly petroleum imports. In response, the authorities in Sana’a told all traders to dispose of goods on an American-Israeli boycott list. Beginning October 5, the ministry will run field inspections and seize any remaining goods.