THIS MORNING: Gov’t hits Houthis with more retaliatory airstrikes + Mohammed bin Salman wraps Cairo visit

Good morning, wonderful people. The update in the ongoing escalation with the Houthis today is that Riyadh is now setting the tempo, with north of 50 strikes against Houthi targets across five governorates in Yemen. The strikes, an answer to Monday’s airbase attack, make it three rounds in a week with no sign either side is looking for an off-ramp.

The risk is being priced on the map rather than in the data. Every story in today’s issue where someone commits money is in the Eastern Province or Riyadh, with nothing of note in the southwest.

The inflation print is the least useful number in the issue. Four months at 1.8% reads as a steady hand, but August closed before the escalation began, so the reading carries nothing about the past two weeks. The line to watch is restaurants and accommodations, down 0.4% on the month — the first place southern travel would register, if it registers anywhere.

And it is, improbably, a startup kind of morning. Barq is crossing into unicorn territory, BRKZ closed a USD 31 mn Series B for materials procurement, and a UAE fleet-tech firm is prioritizing its expansion in the Kingdom. Founders are raising against a 2030 story while the wires run alerts for four cities.

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Warming up again?

Crown Prince Mohammed bin Salman left Cairo yesterday after a working visit, where he sat down with President Abdel Fattah ​Al Sisi for a closed one-on-one, then expanded talks with both delegations. The talks covered Red Sea and Bab El Mandeb navigation security, the Yemen crisis, bumping up trade and investment, and coordination on Palestine and Sudan.

The Sumed lifeline

Saudi crude stored in Egypt can buy Riyadh another week of loadings before Red Sea exports have to fall sharply, The Wall Street Journal reports, citing people it says are familiar with the matter. The Kingdom temporarily shut the East-West oil pipeline after it was targeted by several drones launched from Iraq on 10 September. Riyadh is trying for a partial restart within days, but full repairs could take six to eight weeks, the sources said.

Why it matters: Within its own borders, the Kingdom could run out of oil stocks for export within days if its East-West pipeline is not restarted, potentially removing up to 4% of global supply from the market. Yanbu’s stocks have fallen by more than 7 mn barrels over the past two months to around 9 mn barrels as of Monday, per Kpler data cited by the Journal, giving the Kingdom only a few days of export cover. Its other routes remain severed: tanker traffic through the Strait of Hormuz is still badly disrupted, and the Red Sea route out of Yanbu is exposed to Houthi advances around Bab Al Mandab.

This is where Egypt comes in: Saudi barrels cross Sumed, the 2.5 mn bbl / d pipeline moving Red Sea crude between Egypt’s Ain Sokhna and Sidi Kerir, steering clear of choked maritime routes. Ain Sokhna can hold around 18.4 mn barrels and Sidi Kerir around 20 mn barrels, though how much of that is Saudi crude isn’t disclosed. August saw crude exports from Sidi Kerir more than double to around 2.3 mn bbl / d from some 1 mn bbl / d in July, with Saudi barrels accounting for most of the increase.

MARKET REAX- Brent traded above USD 108 per barrel, up more than 4%.

War watch

The government responded to the Houthis’ last round of strikes on Monday by intensifying its airstrikes on Yemen. The Houthis claim Saudi Arabia launched 54 airstrikes targeting Yemen’s Taiz, Lahj, Al Jawf, Marib, and Hodeidah governorates, the group’s military spokesperson Yahya Saree said. These strikes follow the group’s attack on King Khalid Airbase in Khamis Mushait.

Makkah was also targeted: Saudi air defences intercepted a Houthi drone south of Makkah, destroying it before it could enter the holy city’s airspace, SPA reports, citing spokesperson for the Saudi-led military coalition Turki Al Maliki.

The ground picture: The Houthis have taken the Khabub mountain range in southern Taiz and other high ground, including parts of Maqbanah, after capturing the Greater and Lesser Hanish islands. Khabub matters more than Perim because its elevation gives the group a defensive line overlooking Bab Al Mandab, and from there it could close the strait — which narrows to 25-28 km near the African coast — using fast boats, anti-ship missiles, drones, and rockets, Yemeni military analyst Khaled Al-Nasi said. Hundreds or possibly thousands of Iranian Revolutionary Guard and Hezbollah personnel have reportedly moved to Yemen to support the Houthis.

Keep it in the Kingdom

The Capital Market Authority (CMA) has tightened the rules on public money market funds, capping their foreign investments at 5% of the net value of their assets, according to a circular seen by Asharq Business. Funds exceeding 20% in foreign assets have six months to drop below that mark and up to two years to hit the final 5% cap, while all overseas investments must hold an investment-grade rating, with non-compliant holdings given up to two years to comply.

Trending up: Saudi’s money market fund scene is on the upswing, with 51 funds seeing a 57% y-o-y increase in asset values, amounting to SAR 76.6 bn, according to the CMA’s 2025 annual report (pdf).

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The big story abroad

Global markets are bracing for an imminent Federal Reserve rate hike, as most economists surveyed by Reuters project a rate increase today, followed by at least one additional hike before April 2027. This will mark a sharp reversal from the earlier expectation of a rate pause, which crumbled once Friday's official figures revealed persistent inflation. We’ll be watching the impact of today's decision closely, given that policymakers in Egypt and the Gulf rely significantly on Federal Reserve action to guide their own monetary policy.

Prelude to a blockbuster IPO? OpenAI is courting top investors for a major capital raise that would boost the startup to a USD 1.2 tn valuation before its public debut, seeking to leverage the success of its newest AI model. These investor talks are preliminary, and the target valuation may evolve as negotiations progress over the coming months. CEO Sam Altman said last week that a listing is unlikely before next year.

On the regional war front, the US has run up a USD 38 bn bill in its six-month conflict with Iran, which is expected to balloon by USD 3 bn every month, according to data from the Congressional Budget Office. Rapidly depleted munitions drive most costs, with the budget office projecting five years to replenish stockpiles.