Iran's regional approach had been based on fragmented groups of allied militias, each waging its own battle on its own schedule, for years. That time seems to be coming to a close. The Houthis and Iran-backed milities in Iraq were not just operating in parallel in Yemen this summer; they were operating from the same operations room with Houthis smart boys sitting with the Iraqi commandos. The July attack was in fact two separate attacks, but a coordinated drone swarm that played out over two days that forced Riyadh and Washington to launch a retaliatory strike together deep into Iraqi territory.

It was no coincidence that the convergence occurred. Iran had been working to arm proxy forces all along Israel's borders for some 20 years, until Hamas's October 2023 invasion precipitated a war that decimated Hezbollah and battered the Palestinian militant groups in Gaza. As the biggest treasure in Lebanon has been lost, Tehran has been making greater efforts to use assets farther from Israel's reach, particularly in Iraq and Yemen, to keep the pressure on Washington and its Gulf allies since the war between Washington, Israel and Iran erupted in late February. The rationale, as analysts and officials monitoring the change have said, is simple: make the war more expensive for the Saudi Arabia and other U.S.-friendly nations that are hosting U.S. troops, but not start a new front against Israel.

The consequences of this realignment were again apparent on Tuesday, as Houthis fired drones and ballistic missiles at energy and civilian infrastructure in Abha, Khamis Mushait, Jazan and Najran in the south of Saudi Arabia, injuring over 70 people, including women and children, and leading to temporary closures at several buildings. This latest attack comes after a series of over a dozen attacks on Saudi oil installations and tankers in the Red Sea since late July, tracked by the conflict monitor ACLED. The Houthis had already announced a complete blockade of Saudi shipping in the Red Sea a week ago, adding to the crisis in the Strait of Hormuz that has already been the subject of a near paralysis of global energy trading since the beginning of the conflict.

The second chokepoint is crucial for markets, as Saudi Arabia had relied on it as a substitute chokepoint. The kingdom diverted much of its crude from the Strait of Hormuz to the Red Sea and via its SUMED pipeline in Egypt and the Suez Canal, which were still open. The shipping tracker Kpler estimated flows through SUMED were close to 650,000 b/d in June before rising to over 1.9 million b/d in August. The rerouting was supposed to be Saudi Arabia's plan B. Rather, the Houthis have proven to be able to hit it as well, with a strike in the northern Red Sea, some 700 miles from their home base, upsetting not only Riyadh, but traders as well, last month.

In response, markets have reacted. Brent crude has risen more than eight percent just this month and briefly passed $99 a barrel this week, the highest it has been since the war broke out, before settling back to the $98.60 level. Goldman Sachs has doubled its price estimates in the last month and now believes the price of Brent could exceed $120 per barrel in 2027 if the Gulf continues to operate at about four million barrels per day below prewar levels a scenario it now views as being more likely than it did a month ago, especially in light of the threat of escalating attacks on shipping in the Red Sea and Hormuz.

It is not a risk on the periphery for economies that are still digesting the inflationary shock from a nine-month war between the world's two largest energy suppliers and their allies. It is the way a regional conflict can escalate into a global one and be spread via fuel prices, freight insurance premiums, and the "dark fleet" strategy which is now forced upon Saudi Arabia, by which a tanker turns off its transponder to obscure its course.

The difficulty of challenging Houthis-Iraqi coordination is further caused by the fact that it leverages the inconciliable contradictions each side can't resolve. Baghdad has issued a deadline for militias to disarm by the end of this month, but the most powerful Iran-backed groups have simply ignored orders, while Popular Mobilization Forces, the umbrella group nominally controlled by the government, has refused to take part in the Saudi strikes with individual commanders charged of running them. Saudi Arabia, on the other hand, is hesitant to restart a long and inconclusive ground campaign in Yemen it has been fighting against Tehran's diktats for years, while analysts read the reluctance as an opportunity to continue the pressure. “Today the two fronts pushing at Saudi Arabia from opposite directions, squeezing each other like pliers that's what it's like,” said one Yemen expert.

None of this indicates Iran's desire for a complete shift to open conflict with Saudi Arabia, which would pose risks for Tehran's remaining proxies. However, it does indicate a calculated bet that the economic and psychological strain of rising oil costs, shipping disruptions and the clear inability of the Gulf air defenses to repel drone swarms will erode American and Saudi resolve to the greater degree than a direct fight with the drones. Washington's latest effort to intensify economic pressure on Iran is only adding to the concoction, not taking away a key element. The week's coordinated strikes suggest that the most perilous part of the war could not be the conflict on Iranian soil, but this one, patiently and together, fought along the path of the tanker convoys through which the world's energy flows.