Oil prices pulled back from a five-month high as traders weighed escalating tensions in the Middle East against surprisingly resilient supply. Houthi attacks on Saudi Arabia are intensifying, with fresh strikes and attempted attacks targeting the kingdom and its key energy infrastructure. Matthew Mullman, Senior Analyst for Global Macro at Signum Global Advisors spoke to Bloomberg's Abeer Abu Omar on Horizons Middle East & Africa.
Let me start with focusing in on Saudi Arabia, the long-term versus the short-term damages that this newish situation perhaps creates for the kingdom.
Thank you for having me, Abir.
Yeah, I think the Houthis saw an opportunity to extract a lot of leverage from Saudi Arabia at this moment. So they're imposing near-term costs. Uh you're already seeing the events, some of these prestige international events that Saudi Arabia was planning to have including the World Energy Council and the future investment initiative coming up next week, already being transitioned to remote uh events that will have far less travel coming in.
They also saw leverage with the US distracted with the war in Iran, um, and they also saw uh already high energy prices, uh, meaning their attacks on oil infrastructure within Saudi Arabia would be felt even keener than previously.
I think in the short term, Saudi Arabia is unlikely to to come to a deal with the Houthis in any way. Um they need first need to reverse the momentum that they've seen, the Houthis taking territorial gains near Mocha, um encircling ties.
They need to stop and blunt that momentum, um, both for the Saudi Arabia to save face and in order to bring the Houthis to the table.
Yeah. Of course, we're still waiting for official confirmations on whether FII will actually be remote. so many uh reports around that. Matthew, let me, let me move on to the prospects of a US involvement. Do you see that happening uh after the midterm elections?
I think certainly the risk of US involvement goes up after the midterms. The political and electoral risk that Trump would be facing in the lead up to November 3rd will go away. However, I think the military constraints that the US military is under now will continue to exist after the midterms.
Namely the uh disposition of the US Navy in the straight of Hormuz, the widely reported uh dwindling stockpiles of interceptors, even more so than offensive missiles that the US military has, that mean that any kind of escalation either against Iran or against Yemen will have increased risks of US casualties um and lower defensive capabilities both for US military in the region as well as US partners in the region.
So that being said, I think of the two conflicts, Let's, Matthew, let's let's talk about let
Okay, let's let's move on to the to the reach of those Houthi attacks that we have been that we have been seeing. Were you surprised at all because while Saudi Arabia is intercepting about 90 or over percent of those attacks, the ones that are getting there are leaving quite a lot of damage. Were you surprised by just how elevated the Houthi capability is now versus how it was 10 years ago, let's say?
Yeah, I was not. I think this is the trend we're seeing in battlefields across the world, first off in Russia, Ukraine, in the Horn of Africa, and even earlier this year with the Iran war, um where the US state-of-the-art anti-air capabilities that were deployed in the Gulf both to uh defend US military airbases as well as the critical infrastructure of Gulf partners, proved very effective, you know, plus 90% as you mentioned.
But when that 5 and 10% of combination of cruise, ballistic and simple drone capabilities can get through and not only cause damage to critical infrastructure, but also cause fatalities as we saw in the Riyadh Airport, um that interception rate is simply not acceptable um for states like Saudi Arabia.
Okay, and finally, Matthew, do you think we could see Saudi Arabia being dragged into this conflict that it realistically has been trying to exit for years uh at this point? And then what consequences does that carry for the Crown Prince's Vision 2030, for global investors, what message does that leave them?
Yeah, I think Saudi Arabian credibility has been damaged by this conflict with the Houthis that as you mentioned, has been going on for years but has really spiked in the last 45 days. I think the image of Saudi Arabia as the premier investment destination within the Gulf has taken a hit.
Um if why would you build critical infrastructure there in all places if if the dispersion of uh critical infrastructure across Saudi Arabia can be overwhelmed by their somewhat limited air defenses. Additionally, I think the image of them as uh kind of the military superpower of the region has been damaged even if they have access to the US cutting-edge capabilities.
If those are not proving effective as we discussed earlier, um that has been damaged. And finally, the the guarantee of the US being under the US security umbrella. Um,
in 2025, we saw the Houthis launch attacks against Saudi Arabia and the US did come to their aid in that sense with Operation Rough Rider, but that ended after a few months with a ceasefire. It was considered to be relatively ineffective. and now we're seeing the US being distracted with getting bogged down in this Iran war and continuing operations in the straight of Hormuz.
They have not yet come to the Saudi Arabia's aid in any meaningful way. Um that security umbrella is now under threat and is under question. And you're seeing Saudi Arabia pivot to other regional alliances with the Mecca Defense agreement with Turkey and Pakistan.
