Mukalla Port Evacuation Call Deepens Saudi-UAE Rift, Jitters Gulf

Mukalla port warning lands as Saudi-UAE ties fray and markets react

A Saudi-led coalition issued an evacuation call for civilians and fishermen around the Port of Mukalla in Yemen’s Hadramout governorate on Tuesday, December 30, 2025, ahead of a limited military operation that the coalition said targeted weapons and combat vehicles. The move matters beyond Yemen’s front lines because it has deepens a Saudi-UAE dispute inside a coalition that has operated for a decade, and it quickly translated into jitters across Gulf assets.

Hours after the Mukalla warning, Yemen’s Saudi-backed presidential council head, Rashad al-Alimi, set a 24-hour deadline for Emirati forces to leave the country and said he was cancelling a defence pact with the UAE. He also imposed a 72-hour no-fly zone and sea and ground restrictions at ports and crossings, with exemptions only under coalition authorisation. For investors, the combination of a military strike, a diplomatic deadline, and a short-lived blockade hits multiple channels at once: Gulf stocks, oil hedges, and regional shipping risk.

Two ships, disabled tracking, and a limited strike at the dock

The coalition said the Mukalla operation followed the weekend arrival of two vessels from the UAE’s port of Fujairah on Saturday and Sunday, December 27–28, and said the ships disabled their tracking systems after reaching Yemeni waters. The coalition said the cargo included large quantities of weapons and combat vehicles intended to support the Southern Transitional Council (STC), the main southern separatist force that is aligned with Abu Dhabi.

Officials said the strike was limited and conducted after documenting the unloading activity at the port, with state media reporting no casualties and no collateral damage. Footage aired by Yemeni state television showed smoke rising from the port area in the early morning and vehicles burned near the docks, underlining how quickly a targeted operation can change the local operating picture for logistics and trade.

Al-Alimi’s deadline raises the stakes inside the anti-Houthi camp

Al-Alimi’s 24-hour demand for Emirati forces to leave Yemen is the sharpest institutional escalation between the two Gulf powers since the coalition intervention began in 2015. The UAE joined the Saudi-led coalition against the Iran-aligned Houthis, then began drawing down troops in 2019, while maintaining influence through aligned local forces. The current rupture reflects competing priorities in southern Yemen, including who controls security forces, ports, and strategic territory in Hadramout, a province that borders Saudi Arabia and hosts key transport routes.

The STC’s recent offensive, which broke a long stalemate in a civil war that dates back to 2014, has pushed the Saudi-UAE rift into the open. The STC says it is pursuing security goals in the east and cutting supply lines to the Houthis, while Saudi Arabia has warned against unilateral moves that undermine de-escalation. The 72-hour restrictions ordered by Al-Alimi add a time-bound pressure point that investors can monitor in real time.

STC rejection widens the rift and complicates the next steps

The STC leadership rejected Al-Alimi’s orders, arguing that decisions about coalition participation are governed by regional alliances and agreements rather than individual decrees. The group has sought self-rule in the south and has been part of a power-sharing arrangement since 2022, but its advance in December 2025 has raised the risk of the anti-Houthi coalition fracturing into internal confrontation.

That matters for markets because the Houthis retain control of northern Yemen, including Sanaa, and have repeatedly threatened shipping routes connected to the Red Sea and nearby waters. A Saudi-UAE split that diverts attention and resources from the broader conflict can shift the risk profile for trade corridors, insurance pricing, and regional capital flows.

Gulf stocks absorb the first shock as risk appetite cools

The immediate market reaction was concentrated in equities. Dubai’s main index fell about 2% on December 30, its steepest one-day drop since June, while Abu Dhabi’s index was down 0.9% and Saudi Arabia’s market slipped about 0.6%. In Dubai, Emaar Properties fell 3.5% and Emirates NBD dropped 1.7%. In Saudi Arabia, Al Rajhi Bank eased 0.7%, Saudi National Bank fell 1.1%, and Saudi Aramco was down 0.3%.

Because the Saudi riyal and UAE dirham are pegged to the U.S. dollar, FX tends to react less than equities in short geopolitical bursts. The faster transmission is usually through stocks, sovereign credit spreads, and sector positioning, especially banks, real estate, and state-linked names that are sensitive to confidence and cross-border policy coordination.

Oil is steady, but hedges stir on policy risk and shipping uncertainty

Crude prices were relatively calm compared with equities, reflecting the fact that Yemen is not a major producer and that broader supply fundamentals still matter. Brent futures for February delivery traded around $62.09 a barrel in European hours on December 30, while U.S. WTI was near $58.22. Even so, oil hedges began to stir as traders weighed whether the Saudi-UAE rift could complicate OPEC coordination, with the group due to meet virtually on Sunday, January 4, 2026.

Ed Meir, an analyst at Marex, said crude pricing has been pulled between geopolitical headlines and expectations that supplies look heavy into early 2026, and he pointed to a “growing oil glut” as a reason prices could trend lower in the first quarter of 2026 unless disruptions intensify. That framing matters for investors because it sets a high bar for a sustained oil spike, even as short-term risk premia reprice around Middle East flashpoints.

Shipping and war-risk pricing is the quiet transmission channel

For global trade, the more durable impact can show up in insurance and freight. Earlier in 2025, war risk insurance premiums for shipments to the Middle East Gulf climbed to around 0.5% from roughly 0.2%–0.3% within a week during a separate regional flare-up, a move that added tens of thousands of dollars per day in extra cost for some voyages. David Smith, head of marine at insurance broker McGill and Partners, said pricing is “subject to constant change,” reflecting how quickly underwriters adjust to new threat assessments.

On the underwriting side, Neil Roberts, secretary of the Joint War Committee in London, has noted that the committee’s listed high-risk areas are closely watched because they shape notification requirements and how insurers assess voyages. A Yemen escalation that pulls in Gulf rivals, or that overlaps with Houthi activity near key sea lanes, is the type of catalyst that can reprice war-risk conditions even if spot oil remains range-bound.

What to watch next: deadlines, blockades, and OPEC cohesion

The next market trigger is the 24-hour window set on December 30 for Emirati forces to leave Yemen, and whether Abu Dhabi responds publicly or through quiet de-escalation. A second trigger is whether the 72-hour blockade and no-fly measures expire cleanly or are extended, because extensions would signal that the dispute is hardening into a longer operational disruption around ports and crossings.

A third trigger is Sunday’s OPEC meeting on January 4, 2026. Saudi Arabia and the UAE are both central to output policy, and a visible rift can complicate consensus even when the formal agenda is supply management rather than Yemen. For equity investors, the base case is a contained episode with limited follow-on strikes and a short-lived risk premium; the downside case is a prolonged Saudi-UAE confrontation that keeps Gulf stocks under pressure and raises shipping costs, while the upside case is rapid deconfliction that allows a rebound in Dubai and a fade in oil hedges.