Saudi Arabia is entering a perilous new stage of its conflict with the Houthis in Yemen, the day of oil installations, international airports, investment conferences and strategic shipping routes as weapons of economic warfare. The attacks are a continuation of a larger geopolitical battle between Iran, the United States and the balance of power in the Arabian Peninsula.

Riyadh's immediate worry is not just about protecting its southern border. The kingdom's grand economic shift, its image as a reliable global energy supplier and capacity to draw in foreign investment is increasingly vulnerable to the relatively low-cost missiles and drones.

With America's military and economic pressure mounting on Iran, there is a strong strategic reason for Iran to use these weaknesses. Tehran will be hard pressed to get Washington to lift its blockade without resorting to conventional warfare. To some extent, pressuring Saudi Arabia is an indirect way of trying to shape American calculations.

The plan was more evident after recent Houthis' attacks on Saudi infrastructure, such as the King Khalid International Airport in Riyadh, Saudi Aramco's Dhahran headquarters. The Aramco strike caused damage to several floors of the building, but there were no reported casualties in this incident.

Adverse psychological and business impacts are not confined to physical destruction. Attacks have disrupted large-scale conferences for the energy sector, and organizers of Saudi Arabia's Future Investment Initiative (SXEP) have had to allow some attendees to participate remotely. The developments hit at the knees of Crown Prince Mohammed bin Salman's campaigns to make Saudi Arabia a safe global investment, tourism, technology, and financial services hub.

The cost of insecurity is not only in the destruction of infrastructure which is crucial to economic diversification in the context of Vision 2030. Extra costs can be significant due to higher insurance rates, delayed investment decisions, aviation disruptions, more defense spending and execution uncertainty.

Economic aspirations for the kingdom's include NEOM, tourism initiatives along the Red Sea, significant logistics infrastructure, industrial diversification and hosting the 2034 FIFA World Cup. International financing, construction capacity, investor confidence and a stable political climate are all essential to these projects.

All four may be complicated if a protracted campaign against Saudi infrastructure takes place.

The energy implications are no less serious. Saudi Arabia continues to be one of the world's leading exporters of crude oil, and a key member of OPEC+. It is vital to the government's revenue and essential to the operation of world petroleum markets.

Historically, September 2019 saw an attack on Saudi oil facilities that temporarily reduced about 5.7 million bpd or nearly 5% of global production at the time.

The current issue is bringing to the forefront worries over further disruptions.

Brent crude settled at around $105.69 per barrel and West Texas Intermediate settled at about $94.14 per barrel on October 13. As of October 16, Brent was trading at above $106 due to continued geopolitical uncertainties. Meanwhile, oil markets are at the same time evaluating the supply concerns in the Middle East, U.S. sanctions policy, Russian fuel supplies and the potential for further maritime interruptions.

Oil-importing countries like India are affected by the import bill, inflation and transportation costs as well as current account deficit, when prices of crude are rising steadily. To give an idea, the extra $10 on 5 million barrels of oil a day would add about $18.25 billion to the annual cost of all imports, assuming costs go up for the entire year and volumes remain constant.

This is not a prediction, but an illustration of why events in Yemen are of greater than Gulf interest.

The maritime dimension adds a layer of risk to that. The Houthis' growing activities along Yemen's Red Sea coast means that they are close to the Bab el-Mandeb strait, which is an important route between the Indian Ocean and the Suez Canal.

This will force commercial vessels onto longer routes around Africa resulting in higher fuel consumption, freight rates and delivery time. European producers, Asian exporters and world shipping firms are then placed in a situation of exposure to a war about which they have very limited first-hand knowledge.

Iran has a strategic benefit in being able to squeeze in two theaters: the Strait of Hormuz and the Red Sea. Tehran could affect the world energy market's price by disrupting both of these corridors even if it were to launch only a short-term conventional war against the Americans.

However, describing the Houthis as simply an arm of Iranian policy is an understatement because the Houthis have their own political goals.

The movement is seeking international recognition of its authority in the northern part of Yemen, lifting the restrictions on the ports and airports and the payment of public-sector salaries and wartime damages. It also calls for the end of Saudi backing for Yemen's internationally recognised government.

These demands are significantly more than a ceasefire. To accept them without any security guarantees will effectively be to institutionalise Houthi military dominance and put Saudi Arabia in the face of a hostile armed group on its southern borders that it will never be able to control.

Riyadh is thus in a very precarious position. The military escalation threat is that there will be more attacks on valuable economic assets, and concessions might lead to more coercion.

Washington's problem is the fact that he is in the middle of it. The Trump administration has denounced the Houthis' strikes, and reportedly provided intelligence and targeting support, but not a commitment to another long-term military campaign. Other complications abound in the timing of any intervention, given the domestic political considerations in the United States, such as impending midterm elections.

It begs the question as to the reliability of American security pledges in the region in the event of continued asymmetric attacks by regional partners.

Pakistan's posture also should be examined. Islamabad's defence ties with Saudi Arabia and diplomatic ties with Iran put it in a very delicate situation. If the Pakistani military expands its involvement it would have consequences for its relations with Tehran, public finances, which are already strained, as well as security considerations. Expectations should not be confused with commitments regarding the deployment of large numbers of troops.

China has significant stakes in not letting matters escalate further. It imports Gulf energy; has many commercial ties with Saudi Arabia and Iran; and played a role in bringing the two countries closer in 2023. Meanwhile, Russia is strategically better served if American forces are pulled away from other Middle East deployments, though rising oil prices and instability in the region would present other challenges for Moscow.