Yemen’s Houthi movement finds itself navigating a precarious strategic juncture in the wake of the Gaza cease-fire.

The group is grappling with a dual challenge: a faltering economy—driven by tightening sanctions, disrupted aid and dwindling revenue streams—and the need to recalibrate its role after the war in Gaza provided its recent raison d’être.

Concurrently, the movement faces an increasingly capable opponent in Saudi Arabia, which has bolstered its defence and intelligence posture against cross-border threats.

The economic squeeze is acute.

Israeli air-strikes have damaged lifelines the Houthis relied on, while U.S. designation and tightened global financial pressure have further strained their resource base.

Domestic taxes and wartime mobilization have compounded hardship for the civilian population under Houthi control, provoking internal unease.

Politically, the cease-fire in Gaza deprives the movement of a key rallying point.

Having projected itself as a regional actor aligned with Palestinian resistance, the Houthi leadership must now find a new narrative to sustain internal legitimacy.

Militarily, while the group retains significant missile and drone capability, the kingdom of Saudi Arabia and its international partners have inflicted sharper blows and upgraded deterrence, reducing the Houthi margin for manoeuvre.

Faced with these converging crises, the Houthis appear to be employing a strategy of calculated threat rather than full-scale confrontation.

They have issued warnings to Riyadh, demanding economic “payments” in return for border calm, and signalled that an agreement or war awaits.

Yet analysts view a full war as unlikely: such a move would be expensive, undermine Houthi governance and provoke stronger regional backlash.

Instead, the group may continue limited provocations, targeting Red Sea shipping or Saudi infrastructure below war-triggering thresholds, to extract concessions while avoiding a direct military clash.

For Saudi Arabia, the path forward is clear: a firm message that aggression will incur significant cost, paired with diplomacy and regional legal pressure to avoid paying into the threat.

The stability of Yemen’s northern region and the broader Red Sea corridor hinges on how each side navigates this tension.

With neither a lasting deal placed on the table nor an escalation of war imminent, the period ahead will test the movement’s resilience against the triple pressures facing it: economic collapse, strategic drift and military containment.