The News
The Houthi movement is experiencing its deepest financial crisis since seizing Sanaa in 2014 — and the timing could not be worse. Their primary strategic backer is fighting for survival, and the financial networks running through Tehran are in disarray. On February 28, 2026, the United States and Israel launched an all-out war on Iran, opening with an extraordinary first strike that killed Supreme Leader Ali Khamenei along with dozens of senior military commanders. From that moment, the Houthis’ financial crisis ceased to be a purely domestic affair — it became a direct reflection of the collapse of the regional architecture that had sustained them.
An Empty Treasury: The Numbers on the Ground
The group has lost key funding sources as a result of airstrikes, tightened U.S. sanctions on its domestic and foreign financial networks, and additional restrictions on transfers from Lebanon, Iraq, and Iran. The impact has been immediate: reporting indicates the group has been unable to pay fighters on several fronts for roughly four months, while it walked back promises to pay Sanaa employees even half their salaries, with no official explanation for the reversal. On the services front, strikes on major ports and a persistent liquidity shortage have constrained imports and access to basic goods, while financial institutions have relocated to government-held territory to avoid sanctions.
Tehran at War: The Backer That Eroded
The war on Iran has not simply added a new burden — it has exposed a structural vulnerability in the Houthis’ relationship with Tehran. Field indicators point to unprecedented Houthi military preparations, with analysts arguing that the group’s movements reflect a repositioning of capabilities in anticipation of potential escalation scenarios following the severing of its supply lines from Tehran. Yet despite Abd al-Malik al-Houthi declaring in his first response to the war that they stood “ready for any necessary developments” and calling on supporters to stand in solidarity with Iran, that rhetorical solidarity has not translated into direct military engagement — itself a telling indicator of the pressure the group is under.
War Economy: The Last Resort
Faced with this twin scarcity, the leadership has turned to what can only be described as a war economy. It has issued strict directives to religious endowment, tax, and zakat authorities to increase financial collection and impose additional levies on citizens. Field fundraising campaigns have been launched under the banner of “holiday convoys for fighters,” while large portions of the wage bill have been redirected toward the group’s network of supervisors at the expense of ordinary public sector employees, amid rapidly deteriorating living conditions. Observers warn that sustaining this approach risks deepening economic and social deterioration and undermining any prospects for recovery in Houthi-controlled areas.
Why This Matters to Washington
Washington is reading this situation through two intersecting lenses. The first: sustained financial pressure may accelerate the erosion of the group’s operational capacity and weaken the loyalty of its base — a development that serves U.S. deterrence strategy. The second: Houthis hemmed in financially and cut off from their Iranian backer may resort to cheaper, higher-provocation tools — Red Sea attacks and threats to close Bab al-Mandab — to force their way into any regional settlement that shapes the post-war future of Iran.
The current landscape presents the group with three paths forward, each carrying distinct implications for regional security and U.S. interests.
The first path — minimum-threshold survival — is the most likely in the near term. Under this scenario, leadership redistributes scarce resources selectively, concentrating them on core loyalty networks while suppressing dissent through security rather than financial means, betting that the war on Iran will be short-lived and that support channels will resume after any settlement. This path keeps the group intact but steadily exhausts its social base, deepening the gap between the rhetoric of resistance and the daily reality of life inside its territories.
The second path — compensatory escalation — becomes increasingly probable the longer the financial crisis persists and Iranian support remains suspended. Here, leadership escalates Red Sea operations and threatens to close Bab al-Mandab, using the war on Iran as internal mobilization fuel and as leverage in any forthcoming regional settlement negotiations. The danger for Washington is that this path draws the United States into a costlier deterrence equation in a theater where it needs to concentrate resources on the Iran file itself.
The third path — gradual fragmentation — is the most distant in time but the most consequential in impact. As Iran’s role as strategic backer continues to erode and financial failures accumulate, the gap between leadership and the operational base widens, and loyalty networks begin fracturing at the edges. This scenario does not necessarily mean the group’s collapse; it may instead mean a chaotic redrawing of Yemen’s influence map — one that opens space for new actors and complicates any viable settlement pathway.
What unites all three paths is that the Houthis are entering the next phase with the weakest financial reserves in their history, and in the most turbulent regional environment since their founding — a combination Washington has never before had to manage in navigating this file.