Diesel prices in parts of Yemen controlled by the government have nearly doubled since January 2026. Construction projects across the country have stopped, and thousands of workers have lost their jobs. The cause is a regional war that started when the US and Israel launched a military campaign against Iran, disrupting the fuel supply chains Yemen's fragile economy depends on completely. Al Jazeera

In January, twenty litres of diesel cost 25,000 Yemeni riyals (about $17). By late July, the same amount cost 45,000 riyals ($30), according to pricing data reported by Al Jazeera on July 29. This increase is part of a bigger energy shock. Brent crude, the global benchmark price for oil, jumped 59% in March 2026 alone. That was the steepest monthly rise ever recorded, bigger than even the jump seen during the 1990 Gulf War. Reuters CNBC separately confirmed that the Iran war caused an energy shock that hit the US economy too, with gas and diesel prices surging before easing when the fighting paused weeks later. CNBC

The US-Israel war on Iran began in late February 2026, according to Al Jazeera. Its effects on Yemen have been severe. An official from the Yemen Petroleum Company in Aden told Reuters in May 2026 that diesel prices rose because of a worsening supply crisis, rising global fuel prices, regional tensions, the closure of the Strait of Hormuz, and higher costs for shipping and marine insurance. Al Jazeera

The Strait of Hormuz is a narrow channel at the mouth of the Persian Gulf. About a fifth of the world's oil passes through it. When it closed, fuel shipments were disrupted worldwide. Yemen is especially vulnerable because the country imports nearly all of its fuel. It produces very little domestically.

For Yemen's construction sector, the fuel price spike has hit every part of the supply chain. The cost of a truckload of sand rose from 130,000 Yemeni riyals ($87) to 190,000 riyals ($127). A metre of window glass went from 90,000 riyals ($60) to 130,000 riyals ($87). These increases are large enough to make existing project budgets impossible to maintain. Countless construction projects have ground to a halt.

Fuad Mohammed, 46, is a construction labourer in the city of Taiz with more than 25 years of experience. He lowered his daily wage from 25,000 Yemeni riyals ($17) to 20,000 riyals ($13) in a desperate attempt to find work. Even at the lower wage, the projects are simply not there. Wafeeq Saleh, executive director of the Taiz Center for Yemeni-Gulf Studies, offers local context. The basic dynamic is straightforward: when material costs rise faster than available money, construction freezes, and the workers bear the cost.

The fuel crisis is also causing secondary problems. Al Jazeera reported on July 12 that Yemenis are turning to dangerous energy alternatives, including unregulated vehicle fuel conversions that have caused vehicle fires. Yemeni authorities organised public workshops to warn people against the practice. Al Jazeera A similar crisis happened in 2022, when twenty litres of petrol at official stations cost 9,500 Yemeni rials ($16) and more than four times that on the black market, according to Reuters. Reuters The current crisis is worse: prices at official outlets have risen more sharply, and the regional war shows no sign of ending soon.

The Houthis, an armed group that controls much of northern Yemen, are making the supply situation worse. On July 20, 2026, they announced a naval blockade. Institute for the Study of War Around July 24, Houthi fighters fired on Saudi oil installations in two Red Sea ports. Reuters AP News reported that the Houthis claimed attacks on two Saudi oil tankers in the Red Sea and, on July 21, fired missiles and drones at Saudi Arabia in response to Saudi strikes. AP News These actions threaten the sea routes through which fuel reaches Yemen's ports, narrowing supply channels that were already tight.

The global demand picture adds another factor. According to the International Energy Agency, global oil demand fell by nearly 5% in the second quarter of 2026 compared to a year earlier, to 99.1 million barrels per day. Reuters Normally, when demand falls, prices go down. Yemen's fuel costs keep climbing anyway. That shows how much local supply disruption and Houthi attacks have separated Yemen's fuel market from global trends.

CBS News reported during live updates on the Iran war that at least seven major pipeline projects were under construction at the time. CBS News Iran's Ministry of Petroleum stated that Iran sold $11.5 billion of crude oil during the war, as reported on July 26. Al Jazeera These two facts show the regional picture: Iran continues to earn oil revenue on one side, while pipeline and shipping infrastructure is threatened on the other, and Yemeni civilians absorb the consequences.

For Yemen's government-controlled areas, the construction freeze is about more than economics. Construction is one of the few industries that hires large numbers of workers with limited specialised skills. When it stops, there is no other industry ready to hire them. The wage cut Fuad Mohammed accepted, from $17 to $13 per day, is a signal that there is no demand for labour even at the lower price. The Yemeni riyal has also lost value against the dollar. That means every imported material costs more in local currency, and every wage paid in riyals buys less.

The broader context here is that Yemen's economy has no financial cushion to absorb a shock this large. The country is split between rival authorities, each with limited ability to subsidise fuel or step into the market. The internationally recognised government in Aden already raised official fuel prices once, in May 2026, when the Yemen Petroleum Company increased petrol and diesel to 1,475 riyals ($0.98) per litre from 1,190 riyals ($0.79). Al Jazeera Raising prices further would deepen public hardship. Paying the difference instead is something the government cannot afford. The room for action has narrowed to almost nothing.

What comes next depends on the Iran war and whether Houthi actions in the Red Sea get worse or calm down. Neither path offers Yemen much relief soon. A longer war keeps the supply disruption going. A ceasefire, a formal halt to fighting, may bring global prices down. But Yemen's own problems, including broken port infrastructure, distribution bottlenecks, and a weakening currency, will persist long after the fighting stops. For labourers like Fuad Mohammed, the difference between war and post-war may not matter much. The construction sites will stay empty either way until fuel becomes affordable again, and right now there is no mechanism, inside or outside Yemen, positioned to make that happen.