By Andrew Mills

July 15 (Reuters) - As the long, punishing heat of summer settles over the Gulf, the mood is turning bleaker by the day. Doha has become the week's unlikely gathering point, with regional leaders and dignitaries streaming into the Qatari capital to pay condolences to the emir on the death of his father Sheikh Hamad — a solemn backdrop in a region that seems to be sliding further from the ceasefire many had hoped would hold. The optics of statesmen exchanging quiet words of sympathy sit uneasily against the noise of renewed strikes, blockades and missile fire that have defined the past seven days, a reminder of just how porous the truce brokered in June has proven to be.

In this week's briefing, Iranian vessels scurry through the Strait of Hormuz just hours before Washington's naval blockade of Iranian ports snapped back into force, and Trump abruptly pivots from a 20% shipping fee to vaguely defined "trade and investment deals" with Gulf states. Our analysis looks at how Saudi Arabia's prized workaround — the pipeline that has spared it the worst of the war’s economic toll — may now be exposed, as Houthi missiles threaten a second front at Bab el-Mandeb. And in our explainer, we ask why the Iran-U.S. ceasefire memorandum looks increasingly like a document on life support, with talks in Switzerland all but shelved for now.

NEWS BRIEFING

• Vessel traffic through the Strait of Hormuz rose on Tuesday, with nine of 11 transiting ships linked to Iranian trade, just before a U.S. naval blockade of Iranian ports took effect Wednesday. The uptick signals a last-minute rush to move Iranian oil and gas exports ahead of tightened restrictions in the waterway, where shipping traffic has remained far below pre-war levels.

• Trump abandoned his proposed 20% fee on Strait of Hormuz cargo on Tuesday, opting instead for trade and investment deals with Gulf states, though details remain unclear. "Based on highly productive conversations with Middle East leadership, I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals,” he said, while confirming the resumption of a full blockade targeting Iranian ships and cargo.

IS SAUDI ARABIA'S WARTIME SAFETY VALVE NOW A TARGET?

For months, Saudi Arabia has looked like the Gulf state best insulated from the Iran war's economic fallout. Unlike its smaller neighbours, the kingdom kept a significant share of oil flowing even as Iran effectively shut the Strait of Hormuz, rerouting crude via a pipeline running from its east coast to the Red Sea.

This week, Yemen's Iran-aligned Houthis fired missiles towards Saudi Arabia for the first time during the war, raising the alarm that Saudi Arabia’s workaround might become the war’s next target.

Saudi Arabia's wartime payoff has been stark: Aramco reported a 25% rise in first-quarter profit, with CEO Amin Nasser crediting the pipeline for "helping to mitigate the impact of a global energy shock and providing relief to customers." In contrast, Qatar, Kuwait and Bahrain, dependent on shipping their products through the mostly closed Strait of Hormuz, have had no such cushion.

The vulnerability in Riyadh's workaround is that it depends entirely on the Bab el-Mandeb, a narrow strait separating the Red Sea from the Gulf of Aden, staying open so ships carrying Saudi crude can access the Indian Ocean and their main customers in Asia. Until this week, the Houthis, who control the country's north, had largely stayed out of the wider war, keeping the southern Red Sea corridor calm even as fighting raged in the Gulf.

That appeared to change on July 13, when the Houthis fired missiles at Saudi Arabia after accusing the kingdom of striking Sanaa's airport, breaking a truce that had tenuously held since 2022.

A Houthi official warned this week that "the Bab el-Mandeb Strait and the Strait of Hormuz will be closed in an operational alliance," a move he said could send oil prices toward $200 a barrel.

The timing is telling. Having already shown at Hormuz that chokepoints are its most potent lever, is Tehran now ready to test a second one?

Middle East scholar Fawaz Gerges told Reuters’ Samia Nakhoul this week that Tehran was showing Washington it could threaten both chokepoints simultaneously, transforming the conflict into an even deeper challenge to the sea lanes that underpin global energy trade — warning that "Now (Tehran) is escalating both near and wide. The message is that not only Hormuz, but Bab el-Mandab, is at risk."

Tehran itself signalled as much on Wednesday. After the U.S. reimposed a naval blockade of Iranian ports in response to the Hormuz closure, the Revolutionary Guard Corps threatened to close "all other export corridors that benefit the U.S. and its allies," declaring in a statement carried by state media that "regional energy exports are either shared by all, or denied to all." Should that statement be read as a new doctrine — one in which Bab el-Mandeb becomes simply the next corridor available to close?

That reframes the question facing not just Riyadh, but the entire Gulf. Yemen itself, long a peripheral battlefield, has the potential to become newly central to how Iran applies pressure. If Tehran can turn a quiet corner of its regional network into a second chokepoint at will, the question for Riyadh — and for Washington — is whether any part of the Gulf's energy infrastructure can still be considered insulated from a war that keeps finding new water to fight over.

CHART OF THE WEEK

THE LAST WAVE: EXPLAINER: WHY THE IRAN-U.S. CEASEFIRE IS FRAYING

The June ceasefire agreement between the U.S. and Iran seemed to unravel further this week amid disputes over the Strait of Hormuz and other unresolved issues. The 14-point memorandum of understanding declared an end to the war and the Strait of Hormuz open for commercial vessels, but its wording was vague on key points, leaving tough issues — notably Iran's nuclear programme — to a second phase of negotiations.

U.S. President Donald Trump declared the initial ceasefire agreement "over" last week, saying Iranian officials were not honouring deals they negotiated. Iran's Foreign Ministry accused Washington of driving the MoU "into crisis," saying Washington has consistently violated its commitments.

Control over Hormuz shipping routes is the central flashpoint, with Iran firing on vessels it says tried to sail through the waterway on an unapproved route before declaring the strait closed again. Additionally, the U.S. revoked a license allowing Iran to sell oil, warning that Iranian actions in the Strait of Hormuz were "wholly unacceptable," which Tehran called a breach.

Hopes that negotiators might resume another round of talks in Switzerland next week have all but fizzled.

As Mohanad Hage Ali of the Carnegie Middle East Center think tank put it: "The MoU is in crisis and you now need a secondary deal to restore it, if it is to be a basis for restoring calm."

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