Saudi Arabia Turns to China as Houthi Threat Grows

Key Takeaways

• Saudi Arabia has asked China to help restrain Houthi advances near the Red Sea.
• Two of the region's main oil export routes are under pressure at once.
• Oil and gold are both moving on how quickly this conflict cools.

Saudi Arabia has turned to China for help containing the rapidly escalating Houthi threat, highlighting just how important Beijing has become to Middle Eastern diplomacy and global energy security.

According to Reuters, 17 September 2026, Riyadh appealed to Beijing after Houthi forces made rapid advances along Yemen's Red Sea coast. China has apparently asked Iran to use its influence over the group to prevent further escalation. Beijing has publicly called for restraint and talks, but its private intervention appears to be a bit more direct.

China has good reason to become involved because the Middle East provides its energy supply, while Iran is heavily dependent on Chinese demand for its oil. Chinese buyers took more than 80% of Iran's seaborne oil exports in 2025 (Kpler, via Reuters). At the same time, instability around Bab el-Mandeb threatens one of the world's most important shipping routes. With traffic through the Strait of Hormuz already disrupted, pressure on the Red Sea leaves global energy markets facing risks on two fronts.

Oil markets have already been reflecting some of that tension. Brent remains above US$100 a barrel despite Saudi efforts to maintain exports, while attacks on infrastructure and disrupted shipping have added another premium to prices. The benchmark sat at US$103.52 on 17 September 2026 (Trading Economics). The proliferation of drone warfare has made oil infrastructure an easy target.

China helped restore relations between Saudi Arabia and Iran in 2023. Now Riyadh is asking Beijing to use that relationship to restrain an Iranian ally. It is a reminder that China's growing influence in the region is increasingly tied not just to trade, but to maintaining the stability of the energy system on which its economy depends.

That leverage has limits. Tehran replied that regional stability depends on the United States and Israel ending their war on Iran, and Chinese officials attached no threat of economic pressure (Reuters).

For markets, any successful de-escalation could remove some pressure from oil. Failure would leave another major supply route exposed, increasing inflation risk and reinforcing demand for assets traditionally used as protection against geopolitical and monetary uncertainty.

One thing has been made very clear from this conflict: The large economies have a ceiling on how much chaos they can tolerate. A "successful" military action becomes unsuccessful if it destabilises energy prices or sources of revenue for its allies. The Houthis seem to be discovering that ceiling now.

Oil prices have since started to ease, and gold has been given some buoyancy. Gold rose 1.02% to US$4,307 an ounce on 17 September 2026 as the oil rally lost steam (Trading Economics). The Fed lifted its target range 25 basis points to 3.75% to 4% on 16 September 2026, its first hike since 2023 (Fox Business). Now that the Fed's hike is out of the way, the next flashpoint may be what Trump decides to do in terms of the Iran conflict/war. According to Axios, via Fox News he is weighing between two extremes of either ending the war with talks or deciding to "annihilate" the regime. This hot and cold negotiating tactic is nothing new, but it leaves the markets at his administration's whims. His party is still accountable however to the upcoming elections in the US, and an out-of-control conflict or sky-high prices are not historically things that inspire confidence.

What it means for investors

An energy shock that lifts inflation while the Fed is already tightening is the combination gold has historically been held against. A narrow US-Iran deal could pull the risk premium out of crude as fast as the escalation put it in, so this is context for portfolio balance rather than a trade. Ainslie Bullion's gold and silver range covers investors positioning for that uncertainty.

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This article is general information only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research or consult a licensed financial adviser before making investment decisions.