Ministers from the Group of Seven (G7) nations are set to convene on Monday to discuss the economic fallout from the ongoing conflict in the Middle East, according to the French government. This meeting comes amid a sharp increase in oil and gas prices.

In late February, the United States and Israel carried out military strikes on Iran, prompting Tehran to retaliate by targeting key oil-exporting nations in the region and disrupting shipments through the Gulf.

These actions have significantly tightened supply chains, leading to a surge in oil and natural gas prices and affecting numerous industries worldwide.

French Finance Minister Roland Lescure announced that the G7 discussions will take place via videoconference. The meeting will feature participation from energy and finance ministers, central bank leaders, and heads of other international organizations.

“There are already differences in the responses largely linked to differences in exposure to the crisis,” Lescure told a news conference on Friday, stressing that Asia was particularly exposed to the turmoil.

“That is one of the reasons why we wanted to convene a G7 of finance, energy and central banks,” he said.

He added that the idea was to exchange views on the impact on financial markets and the economy, later telling local media it was the first time in half a century the G7 had used this format.

The G7, an informal grouping of the US, Canada, Britain, France, Germany, Italy and Japan, helps shape policy debates in the world’s wealthiest nations.

The United States has sought support from the group to help halt Iran’s blockade of the Strait of Hormuz shipping route.

After a meeting last week, G7 foreign ministers said it was an “absolute necessity” for Iran to re-establish free passage through the strait and called for an end to attacks on civilian infrastructure.

Governments under pressure

Under increasing pressure, many governments have rolled out measures to limit the impact of supply difficulties and soaring energy prices.

But a lack of clarity over US war aims, along with uncertainty over the potential length of the conflict and the spread of hostilities, has left governments scrambling for coherent responses.

On Monday, the federal government announced the long-standing fuel excise would be halved for three months as concerns around fuel supply grow. Prime Minister Anthony Albanese himself brought up the same lack of certainty as to how long the conflict could continue.

“I want to see more certainty in what the objectives of the war are, and I want to see a de-escalation,” Albanese told journalists during a press conference about changes to the fuel excise.

US officials, including President Donald Trump, have said their goals in the war are almost achieved, but thousands of US personnel have been sent to the region in an unprecedented military build-up.

Activists based outside Iran say the US-Israeli campaign has killed more than 3,000 people in the country, over half of them civilians, while Lebanese officials have said more than 1,000 have been killed there since Israel began attacking its territory in retaliation for Hezbollah attacks on 2 March.

Officials in Israel and countries across the Gulf have also reported much smaller numbers of casualties.

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In a strategic move potentially complicating U.S. military operations and extending the Middle Eastern conflict, a significant Iranian ally has initiated strikes against Israel, specialists suggest.

The Houthis, aligned with Iran, entered the fray on Saturday, launching an initial assault on Israel. This escalation raises concerns about potential threats to the Bab al-Mandab Strait, another crucial maritime passage in the region.

Amidst this turmoil, the oil market faces significant challenges, particularly as the Strait of Hormuz—an essential corridor on Iran’s southern frontier that facilitates the transit of about 20% of global oil and gas—faces severe restrictions.

The recent aggression follows a series of retaliatory actions between the Houthis and the United States, intensifying since the escalation of the Hamas-Israel conflict on October 7, 2023. The Houthis have specifically targeted vessels associated with Israel, aligning themselves with Palestinian interests.

This tactic of creating instability has evolved with the Houthis, who have extended their reach to broader attacks on Red Sea shipping activities.

The US, at times helped by the UK, responded with naval defence and airstrikes, leading to an ongoing tit-for-tat conflict.

A ceasefire between the Houthis and the US, brokered by Oman in May last year brought an end to nearly two years of attacks on ships.

A separate Houthi ceasefire with Israel, agreed in October after Israel agreed to a ceasefire with Hamas, now appears to be shattered.

The Houthis have once again emerged, raising fears of further disruptions to shipping routes and complicating the ongoing conflict and tenuous peace deals in the region.

Israeli authorities said on Sunday that they had intercepted two drones launched from Yemen.

Who are the Houthis?

The Houthis are a “powerful ally” of Iran, and their founding movement, consisting of political and military arms, started in the 1990s.

Three decades on, the rebel group-turned-governing force — now holding swathes of Northern Yemen — is deeply involved in long-running conflicts with regional and global implications.

Historically, the Houthi’s primary point of conflict has been with Yemen’s internationally recognised government, which it seeks to overthrow. The ongoing civil war between the two parties, alongside a gradually escalating conflict between the Houthis and Saudi Arabia, has fuelled one of the world’s largest humanitarian crises in Yemen.

The group was designated as a terrorist organisation by the Australian government in 2024 after a series of attacks on ships in the Red Sea.

Since October 2023, they’ve also been involved in attacks on shipping in the Red Sea, which Hisham Al-Omeisy, a senior Yemen advisor at the European Institute of Peace, said was perhaps their most effective destabilising strategy in the region.

“Since they were last attacked, the Houthis have had time to regroup and rebuild their stockpiles, now they’re back and they are ready to fight,” he told ABC radio on Monday morning.

“By attacking the Bab al-Mandab Strait, they would create a second front in the war. They haven’t shut down the Strait yet, but that could be the next escalatory step.”

The Strait acts as the southern entry/exit point for the Red Sea, leading directly to the Suez Canal, making it essential for trade between Europe, Asia, and the Middle East.

A high volume of petroleum and natural gas travels through this strait, making it one of the world’s most significant oil transit chokepoints.

This economic traffic makes it a desirable target for the Houthis, Al-Omeisy said, as the “powerful ally of Iran” looks to deter further US and Israeli attacks in the region.

While it’s not immediately clear how badly their conflict with the US and Israel depleted the Houthis, Israel killed a dozen members of their senior leadership.

In August, Israel killed the Houthi prime minister, the chief of staff and several cabinet ministers in an airstrike, but Abdul Malik Al-Houthi, the movement’s leader, was not there.

Why get involved now?

The Houthis’ weekend strike against Israel marked four weeks of conflict since the US and Israel attacked Iran on 28 February.

Al-Omeisy said their decision to enter the war would be “carefully and strategically” timed and would be looking to achieve two goals.

Firstly, they want to retaliate against Israel in support of Iran and the “broader Muslim cause”, he explained, noting the Houthis have links to Shia Islam.

They are also looking to deter a US invasion.

“They are also wary that the US has threatened to put boots on the ground in Iran, so firing rockets at Israel signals they are willing to disrupt global trade and oil shipments if they choose to shut down the Strait,” he said.

The Washington Post reported on Sunday that the Pentagon is preparing for weeks of ground operations in Iran. The plans could involve raids by special operations and conventional infantry troops, the Post reported, citing US officials.

Washington has dispatched thousands of marines to the Middle East, with the first of two contingents arriving on Friday aboard an amphibious assault ship, the US military has said.

Director of Middle East Studies Forum at Deakin University, Shahram Akbarzadeh, said the Houthis’ attack on Israel could “significantly expand the conflict”.

“Iran had already tried to regionalise the war to put pressure on the United States through economic pain,” he told SBS News.

“Now, if [the] Houthis also enter the war, that will seriously affect the flow of oil through the Red Sea, and that will triple the amount of pressure on [US President Donald] Trump to end the war.”

Long-term effects

While the Houthis were willing to attack Israel, Akbarzadeh suspected that the group would not follow Iran’s strategy of attacking neighbouring Gulf states.

Since 28 February, Iran has attacked several of its neighbouring countries, disrupting air travel and putting pressure on other governments to intercede in the ongoing conflict.

“The Houthis, however, are likely to target US assets, like military bases throughout the region, and to hit ships in the Red Sea,” he said.

“That will significantly increase pressure on Trump to address the financial implications, consequences, and the rise in oil prices that is affecting the global economy, and it’s affecting Trump’s home base.”

Akbarzedah said that this would further pressure Trump to withdraw from the Middle East and to “end the war quickly”.

“He can simply declare victory and say he has achieved his objectives and walk away from the war,” he said.

“He has destroyed Iran’s Navy, Iran’s Air Force, and he has decapitated Iranian leadership; he can list those as evidence of his success and victory that they have achieved on the battlefield.”

Al-Omeisy said Trump would likely threaten the Houthis, as in years past, and attempt to wipe them out through military action rather than retreat.

But the group’s leadership structure is “robust” and could withstand even the military might of the US.

“They’ve (the Houthis) have had these plans in place for the longest time, being a militia,” he said.

“They understand that the leadership can be taken out at any given time, and that’s why they have a succession plan in place that goes seven layers deep.”

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