Introduction

On March 4, 2025, the United States Department of State implemented an executive order designating the Houthi group, backed by the Iranian regime, as a Foreign Terrorist Organization (FTO).

The implementation of this designation by the U.S. State Department followed a decision signed by U.S. President Donald Trump on January 22, 2025, which mandated the designation and granted the State Department a period of 30 days to submit a report regarding the decision.

This paper examines the background of the terrorist designation of the group, the broader context in which the decision was issued, and the economic restrictions imposed on the group. It also analyzes the group’s growing international and political isolation, the trajectory of the peace process—whether toward continuation or failure—the prospects of the military option, and concludes with a set of recommendations in light of the designation decision.

 

The Group’s Terrorist Background

The United States’ decision to designate the Houthi group as a Foreign Terrorist Organization was neither surprising nor unprecedented. Several countries had previously issued decisions classifying the group as a terrorist organization.

The Houthi group has long been associated with a record of terrorist activities, including widespread human rights violations. Numerous organizations have documented these practices in reports monitoring the group’s conduct. The group has also threatened the interests of neighboring states and repeatedly carried out attacks against them. Accordingly, the recent designation aligns with the group’s established record of terrorism. The significance of the U.S. designation does not lie in being the first of its kind, but rather in being issued by a state with the global influence and capabilities of the United States, which possesses substantial capacity to isolate the group and weaken its operational capabilities.

On October 22, 2022, the Yemeni National Defense Council issued Resolution No. 1 of 2022 designating the Houthi group as a terrorist organization in accordance with Yemen’s Criminal Law and the Arab Convention on Combating Terrorism, as well as other international and regional agreements ratified by the Republic of Yemen.

The National Defense Council is the highest defense and security authority in Yemen and is chaired by the Chairman of the Presidential Leadership Council, Rashad Al-Alimi.

In addition, the United Nations Security Council issued two resolutions condemning the Houthi group, including Resolution (2216) in 2015 and Resolution (1373) in 2001. Several countries have also designated the group as a terrorist organization, including Saudi Arabia, the United Arab Emirates, and Bahrain. Similarly, both the United Kingdom and the European Union have taken measures against the group in a similar context.

The sequence of international actions recognizing the group’s terrorist nature continued when the government of Canada officially listed the Houthis as a “terrorist entity under the Criminal Code” on December 2, 2024. Likewise, both Australia and New Zealand designated the group as a terrorist organization.

On December 10, 2024, the United States imposed severe sanctions on senior Houthi official Abdul Qader Al-Murtada, head of the prisoner exchange committee, due to abuses against detainees, including torture and ongoing human rights violations.

It is also worth noting that the United States had previously designated the group as a terrorist organization on January 18, 2021, during the final days of President Donald Trump’s first administration. However, the subsequent administration of Joe Biden revoked the designation and replaced it with the classification of a “Specially Designated Global Terrorist (SDGT)”, a less restrictive status that still permitted certain forms of engagement—unlike the most recent designation.

 

The Broader Context

The U.S. decision to designate the Houthi group as a terrorist organization had been widely anticipated by many observers, particularly following the return of a new administration to the White House led by President Donald Trump in January of this year. Trump’s administration signaled a major shift in U.S. foreign policy across several strategic files, including the Yemeni file and the issue of the Houthi group.

Trump has historically pursued a policy of confrontation toward Iran and its regional proxies, aiming to contain and weaken Tehran’s influence across political, economic, and military dimensions. This approach was evident during his previous presidential term, including his decision to authorize the targeted killing of Qassem Soleimani on January 3, 2020.

The designation of the Houthi group as a terrorist organization also reflects its strategic alignment with Iran, where it functions as one of Tehran’s most active regional proxies. The depth of this relationship was underscored when Iran appointed an ambassador to the Houthi authorities in September 2024.

Furthermore, the group’s hostile activities in the Red Sea—particularly attacks on international maritime shipping since late 2023—have posed direct threats to global commerce and Western interests, especially those of the United States. These attacks have been a key factor driving the recent designation.

According to the executive order signed by President Trump, the designation was justified by multiple incidents in which Houthi forces opened fire on U.S. naval vessels, with support from Iran’s Quds Force, and conducted repeated attacks on civilian infrastructure in Saudi Arabia and the United Arab Emirates.

The group’s missile and drone attacks targeting Israel —within the framework of the “Unity of Fronts” doctrine promoted by Iran—further reinforced the rationale for the designation, given Israel’s status as a strategic ally of the United States in the region.

Additionally, U.S. officials have expressed concerns regarding alleged cooperation between the Houthi group and Russia, including reports of arms transfers via smuggling networks intended to threaten American interests. The United States has also accused China of reaching informal understandings with the group to avoid attacks on Chinese commercial shipping.

Another factor contributing to the designation was the Houthi group’s detention of employees of international organizations in Sanaa, despite their exclusively humanitarian roles, and the group’s refusal to release them despite international pressure.

 

Economic Constraints

The group’s economic interests constitute one of the sectors most significantly affected by the U.S. designation decision. Based on the designation, the United States Department of the Treasury is expected to impose strict economic restrictions on the flow of funds, external financial transfers, and economic entities linked to financing the Houthis. The designation aims to dry up the financial resources through which the group funds its military operations in their various forms.

The Global Financial System “SWIFT”

Disrupting the flow of funds to terrorist organizations is a central pillar of U.S. counterterrorism policy. Accordingly, following the designation of the Houthi group as a Foreign Terrorist Organization, the U.S. administration is expected to impose stringent restrictions preventing the group from receiving financial support from states, institutions, or individuals, as well as limiting its ability to generate revenues from smuggling activities through both formal and informal financial institutions.

The global financial messaging system SWIFT represents one of the key mechanisms for implementing these policies. Terrorist organizations generally rely on financial flows through formal and informal channels to finance their activities, either through direct transfers or through parallel financial networks that exploit vulnerabilities within banking systems.

With the designation entering into force, the United States will impose strict restrictions on any financial transactions involving the group or individuals and entities affiliated with it. This is expected to affect the inflow of external remittances into areas under the group’s control, freeze potential assets held abroad, and weaken its ability to exploit financial institutions, thereby isolating it from the global financial system.

As a result, all financial transactions will come under strict scrutiny by international banks, which typically avoid dealing with any entity listed under terrorism designations due to the risk of U.S. sanctions. Consequently, the group is likely to face significant difficulties in securing financing from external sources.

Funding from International Organizations

Financial transfers associated with international and humanitarian organizations may also cease entirely in Sanaa if international organizations suspend their operations in areas under Houthi control. This would result in a severe shortage of foreign currency for the group, making it extremely difficult to finance imports and sustain its activities across various sectors. This challenge is further compounded by the fact that several international organizations have already begun dismissing staff working in Houthi-controlled areas.

In this context, the Yemeni government has called on all international agencies and organizations to relocate their operational headquarters to the temporary Yemeni capital of Aden and conduct their activities from there. The government has justified this request by citing escalating Houthi attacks against humanitarian personnel, increasing restrictions on their operations, and the kidnapping of several staff members.

Such a shift could deprive the Houthi group of financial flows previously generated through international humanitarian and development agencies, thereby intensifying economic pressure on the group. Given that economic resources constitute one of the key pillars of the group’s strength, such pressure could significantly weaken its capacity.

Drying Up Sources of Funding

In addition to receiving external financial support—particularly through the exploitation of humanitarian assistance—the group also relies on internal revenue sources that generate billions of Yemeni rials annually.

Among the most significant of these sources are revenues from smuggled Iranian oil and gas—often sold at reduced prices or supplied as part of Iranian support—and then sold at high prices on the local black market. Other revenue streams include proceeds from the telecommunications sector, customs duties and taxes on imported goods, as well as various forms of levies and extortion imposed on the public and business community under different labels such as “zakat” or “war effort contributions.”

With the U.S. designation of the Houthis as a Foreign Terrorist Organization now in force, the United States has imposed stringent economic sanctions targeting commercial and investment entities and individuals linked to the group. On April 2, the United States also banned the import, sale, and export of petroleum derivatives through the port of Al Hudaydah Port, alongside additional restrictions aimed at directly and indirectly cutting off the group’s sources of funding.

Relocation of Bank Headquarters

The designation decision—which effectively restricts the group’s access to the SWIFT financial system—will negatively affect banks headquartered in Sanaa. This situation may compel those banks to relocate their main headquarters to Aden in order to maintain access to SWIFT services.

The Yemeni government had previously attempted to force banks to relocate their headquarters to Aden by threatening to cut them off from SWIFT and revoke the licenses of banks that refused to comply. On July 10, 2024, the government issued a decision to revoke the licenses of six banks headquartered in Sanaa. However, the decision was later reversed under international pressure on humanitarian grounds.

Following the U.S. designation decision, discussions about relocating bank headquarters to Aden have resurfaced. The Central Bank of Yemen under the internationally recognized government announced that several banks had contacted it to express their willingness to relocate to Aden.

These indicators suggest that banks may ultimately transfer their headquarters to Aden, a move that could represent a significant blow to the Houthi group.

 

International and Political Isolation

Prior to the designation, the group had been able to move relatively freely across several international capitals, and its representatives often appeared before international organizations and foreign governments. These political engagements enabled the group to expand its international relations, promote its narrative regarding the war and peace process, and secure additional support through international organizations and networks abroad.

However, the new U.S. designation will significantly restrict such engagements. Once the designation takes effect, any entity—whether a state, organization, or individual—that engages with or provides support to the Houthis may be considered by the United States and its allies as complicit in supporting terrorism, thereby facing severe legal and economic consequences under U.S. law.

This effectively imposes strict political constraints on the group and contributes to its growing isolation from the international community.

In addition to political isolation, the designation is also expected to limit the flow of weapons to the group. Reports indicate that the group has received shipments of Chinese and Russian weapons—often in exchange for reciprocal arrangements such as refraining from targeting their commercial vessels—as well as Iranian weapons smuggled by sea. The U.S. administration is expected to intensify maritime monitoring efforts to prevent arms shipments from reaching the group, although such measures may not completely eliminate smuggling networks.

 

Implications for the Yemeni Government

The designation may produce several positive political outcomes for the internationally recognized Yemeni government. Among these is the enhanced ability of the government to engage with the international community and mediators with greater diplomatic leverage, expose Houthi violations more effectively, and pressure international actors to reconsider their approach toward the group.

Diplomatically, the designation provides an opportunity for Yemeni diplomacy to recalibrate its international engagement strategy and mobilize broader international support to contain the group externally. It also strengthens the government’s diplomatic and political standing by shifting the international perception away from treating the Houthis as an equal counterpart.

Furthermore, the designation may restrict the movement of Houthi leaders abroad and limit their political activities internationally.

Finally, the designation undermines the prospects of legitimizing the group through political settlements that might allow it to evade accountability for its actions while gaining political recognition and international legitimacy.

 

Peace Process

The designation decision comes at a stage that could be described as one of “peace-making,” facilitated through Omani mediation, United Nations sponsorship, and the engagement of the conflict parties in peace negotiations. The peace process had achieved unprecedented progress since the beginning of the war, including the agreement on a truce in April 2022. This was followed by the visit of the Saudi ambassador to Yemen, Mohammed Al‑Jaber, to Sana’a, and reciprocal visits by Houthi delegations to Saudi Arabia. Several restrictions on the Houthi group were eased in multiple areas, most notably the resumption of flights from Sana’a Airport and the relaxation of restrictions on the Port of Hodeidah. However, these conditions did not endure following the outbreak of the war in Gaza and the Houthi group’s targeting of shipping companies in the Red Sea. These developments effectively froze the peace process at the time, culminating in the recent designation decision, which appears to have dealt a decisive blow to ongoing peace efforts.

It appears that the roadmap is now effectively off the table following the U.S. designation, as it entails prohibiting engagement with the Houthi group and restricting the movement of its leadership—factors that may significantly hinder any peace-related initiatives from both sides.

Nevertheless, the option of peace remains on the table, and its possibility—though diminished—has not entirely disappeared. There are still indicators suggesting that the peace process retains some prospects. The UN Special Envoy to Yemen, Hans Grundberg, has sought to employ the full weight of his mandate to preserve the peace process. This includes attempts to prevent the designation decision, which he considers detrimental to peace efforts and potentially leading to renewed conflict in Yemen, as he stated during his briefing to the United Nations Security Council. He continues to urge international and regional actors to adhere to the roadmap.

The Houthi group has also undertaken certain actions that could be interpreted as signaling a willingness to maintain the peace process. The most notable of these was the release of the crew of the hijacked vessel “Galaxy Leader,” consisting of 25 personnel, after 14 months of captivity, coinciding with the designation decision. This move could indicate a Houthi inclination toward de-escalation, particularly as some observers interpret the designation as a pressure tool aimed at compelling the group to make concessions within a revised peace framework shaped by the U.S. decision. However, this possibility remains uncertain; the release of the crew could equally be viewed as a tactical maneuver intended to reshape perceptions and portray the group as a party seeking peace while attributing any disruption of the peace process to the U.S. designation itself.

One of the most significant factors affecting the future of the peace option is the humanitarian file. The peace process has become a humanitarian necessity as much as a political one, especially given the severe conditions faced by the Yemeni population as a result of the conflict. According to reports by international organizations, nearly 19 million Yemenis require food assistance. Consequently, humanitarian considerations may help sustain the peace process to some degree. At the same time, the Houthi group has frequently used the humanitarian situation as leverage to advance its interests. Conversely, the Yemeni government has asserted that the continued presence of the Houthi group constitutes the greatest threat to the humanitarian situation—greater even than the impact of decisions directed against the group. This suggests that the government remains committed to the designation decision and intends to leverage it against the Houthis, prioritizing political considerations despite humanitarian concerns.

Saudi Arabia, for its part, has not expressed strong support for the designation decision, which may indicate that it views the move as undermining its efforts to implement the roadmap.

Ultimately, indicators pointing to the failure of the peace process appear stronger than those suggesting its continuation. Each party is likely to respond to the decision in ways aimed at consolidating or preserving its influence. The Yemeni government will likely seek to capitalize on the designation to mobilize political and military support for confronting the Houthis, while the Houthi group may frame the decision as an attempt to besiege and strangle it economically and politically. In response, it may resort to countermeasures such as targeting U.S. interests or escalating hostilities in an effort to pressure Washington to reconsider or soften the decision. Weighing these competing indicators suggests that the prospects for the peace process to endure are extremely limited.

 

The Military Option

The Houthi group seized power through a coup and took control of the capital, Sana’a, launching an expansionist war aimed at dominating the rest of Yemen’s provinces. This development plunged the country into a prolonged cycle of militarized confrontation. The group’s functional role within the so-called “Axis of Resistance” did not stop at fueling a domestic civil war; it also expanded to affect neighboring states and the wider region. Its escalation eventually reached the point of threatening international interests, particularly through attacks on international maritime navigation.

Notably, the group’s turn toward threatening international interests occurred while a domestic truce had been in place since 2022. Such cross-border actions risk undermining the internal truce, which had been established under international auspices to facilitate peace efforts and genuine negotiations. Although the Houthi group initially signaled its commitment to the peace track, it later launched attacks in the Red Sea and the surrounding regional waters—actions widely interpreted as either a withdrawal from the peace process or an attempt to exploit it.

These developments prompted the United States, the United Kingdom, and Israel to conduct military strikes against the group, bringing the military dimension back to the forefront and paving the way for the recent designation decision.

Designating the group as a Foreign Terrorist Organization effectively strips it of political legitimacy, creating an additional obstacle to its participation in peace negotiations. Moreover, the U.S. designation prohibits Washington’s allies from engaging with the group or hosting its representatives, which may signal diminishing political prospects for the group within any continued peace framework.

The collapse of the peace option and the suspension of negotiations would significantly increase the likelihood of a return to military confrontation. The probability of a military option has already grown following the Red Sea incidents and the recent designation decision. The truce has become increasingly fragile, with limited prospects for endurance. Evidence of this is visible in the Houthi group’s mobilization on the ground, as well as the preparations undertaken by the internationally recognized Yemeni government and its allied forces. A notable development in this regard was the meeting held on January 12 between the Chief of the Yemeni General Staff, Sagheer bin Aziz, and the commander of the United States Central Command—an interaction that some observers interpret as an indicator of potential military escalation.

The military option therefore remains strongly present in strategic calculations. Yet it exists amid both confirming and opposing factors—obstacles that may delay or limit such a course of action.

 

Challenges and Constraints

One of the most significant obstacles to a military approach is the concern among Gulf states about potential Houthi retaliation. Previous incidents—including the 2019 attacks on Saudi Aramco facilities in Saudi Arabia and the missile attacks on the United Arab Emirates in 2022—have heightened these concerns. Confidence in U.S. security guarantees among Gulf states has also weakened to some extent, which may discourage military escalation.

Iran also remains committed to consolidating its influence in Yemen, particularly after setbacks to its regional influence in Lebanon and Syria. Statements by the Iranian Foreign Minister, Abbas Araghchi, affirming continued support for the “Axis of Resistance” and denying any decline in its influence highlight Tehran’s determination to maintain its strategic foothold in Yemen. Such determination complicates prospects for a decisive military resolution.

Another complicating factor is the lack of full coordination between Saudi Arabia and the United Arab Emirates in managing the Yemeni file. Effective military action would require consolidating all forces backed by both states under a unified operational framework against the Houthi group.

Regarding U.S. military operations, a spokesperson for the U.S. Navy indicated that Washington had spent approximately $1.85 billion on operations in the Middle East—including Yemen—between October 7, 2023 and October 1, 2024. Such costs could prompt the United States to reassess its approach and potentially scale down its operations or adopt alternative strategies.

The humanitarian situation also represents a major constraint on any military escalation. The Houthi group has frequently leveraged humanitarian concerns to shield itself from political, economic, or military pressure.

 

Opportunities and Supporting Factors

The Yemeni government is seeking to persuade the international community to support a decisive military resolution. Although it remains cautious about potential consequences, official statements and the government’s welcoming of the designation decision suggest a preference for this option.

One of the strongest supporting indicators is the language of the designation decision itself, which explicitly refers to the objective of “eliminating the Houthis’ capabilities.” This phrasing implies that military action may form part of the broader strategic framework, even if not explicitly stated.

Saudi Arabia may also be motivated by the desire to eliminate the Houthi threat in the near and long term. Such an outcome could only be achieved through military measures aimed at dismantling the group’s capabilities and restoring state authority in Yemen, including the disarmament of the Houthis. From Riyadh’s perspective, the group’s ideology and missile attacks on Saudi territory represent a persistent security threat linked to Iranian regional strategy.

Another factor reinforcing this possibility is the return of Donald Trump to power, given his previous willingness to support Saudi military operations in Yemen and approve arms sales without the restrictions often imposed by Democratic administrations. This political shift could encourage Saudi Arabia to consider a stronger military posture.

International conditions may also be conducive to reducing Houthi capabilities. The international community increasingly perceives the group as a threat to global interests due to its attacks on international shipping lanes. Israel likewise seeks to weaken the Houthis as part of a broader effort to diminish the capabilities of the “Axis of Resistance,” especially as the group’s leader has continued to threaten renewed attacks on Israel and international maritime routes in recent days.

In this context, the United States has demonstrated a willingness to undertake direct military action against the group. In line with the objective of eliminating “Houthi capabilities,” the Trump administration conducted new military strikes on Sana’a on March 15, 2025.

These developments also coincide with the broader weakening of the “Axis of Resistance” across the region, a dynamic that could reduce the Houthis’ strategic resilience and facilitate military options. Indeed, anticipating potential escalation, the Houthi group launched attacks in Marib, Al-Jawf, and Taiz during the previous month.

Ultimately, the military option appears to be an increasingly prominent and perhaps inevitable trajectory. The Houthi group continues to perceive itself as militarily strong, which encourages it to maintain its influence and delay meaningful peace concessions. However, such an option may not materialize immediately. Instead, it may follow a period during which the designation decision is used to economically constrain the group and weaken it internally. This interim phase could also be used to reconcile differences among Yemeni allies, reorganize the domestic political landscape, and integrate military forces—preparatory steps that would precede any large-scale military operation, despite the persistent challenges associated with such a scenario.

 

Recommendations

Based on the analysis presented in this paper regarding the U.S. designation of the Houthi group—its dimensions, implications, and potential opportunities—the study offers the following recommendations addressed to the Yemeni Presidential Leadership Council, the Yemeni government, the Arab Coalition supporting legitimacy, the United Nations and its agencies, as well as regional and international partners:

• Strengthen cooperation between the Yemeni Presidential Leadership Council and international and regional partners to ensure the effective implementation of the designation decision at all levels, thereby isolating the group and depriving it of any form of support.
• Intensify diplomatic efforts to reinforce the position of the internationally recognized Yemeni government as the sole legitimate partner of the international community and the representative of the Yemeni people, while encouraging other actors to adopt similar measures toward the group.
• Engage with international organizations, agencies, banks, and commercial companies to relocate their headquarters to Aden after the necessary security, political, and economic conditions have been established.
• Adopt parallel governmental decisions that reinforce state authority, such as relocating key sectors—including telecommunications, transportation, and national airlines—to Aden.
• Mobilize international support to provide the Yemeni government with the necessary military assistance to confront the Houthi threat and protect international interests.
• Ensure that the Yemeni government fulfills its responsibilities to mitigate the humanitarian consequences of the designation decision for the Yemeni population, particularly those living in areas under Houthi control.
• Urge the Arab Coalition—led by Saudi Arabia and supported by United Arab Emirates—to intensify its support for the Yemeni government and promote greater cohesion among pro-government forces to capitalize on the opportunities created by the decision.
• Encourage the United Nations and the international community to engage with the internationally recognized Yemeni government as the sole legitimate representative of the Yemeni people and a credible partner committed to peace efforts and the preservation of international peace and security.
• Recognize that there is no sustainable solution to the Houthi threat and its dangers to regional stability and international maritime routes except through supporting the Yemeni government in restoring the Yemeni state. Any alternative approach would amount to a waste of time and resources.