NEW: The Houthis fully encircled Taiz City on October 12, which will impose multiple dilemmas on Yemeni government-aligned forces. A complete encirclement further restricts Yemeni government-aligned forces’ ability to reinforce and resupply their positions, withdraw forces, and sustain defensive operations in and around Taiz City. Other Key Takeaways: The Houthis likely perceive Saudi Arabia’s temporary closure of King Khalid International Airport and reports of Saudi Arabia’s air defense constraints as indicators that the group is successfully mounting pressure on Saudi Arabia. Such a perception would incentivize the Houthis to sustain attacks on Saudi critical infrastructure. Saudi Arabia has not indicated any willingness to agree to Houthi demands at the time of this writing, however. Iran appears to be targeting commercial vessels conducting ship-to-ship oil transfers in and near the Strait of Hormuz in order to try to undermine vessels’ ability to move energy through the strait. Iran has increased its threats against vessels in the strait, likely to reinforce the Iranian threat to shipping and reestablish control over the waterway by deterring vessels from using non-Iranian-approved routes. Iran may be developing its anti-ship missile capabilities to improve its ability to target vessels. Iran is threatening to attack US-linked digital infrastructure in response to potential future US strikes, likely in order to try to deter the United States from resuming military action against Iran. Iran likely seeks to threaten to expand the potential US targets for Iranian attacks in order to raise the United States’ perceived costs of renewed conflict with Iran.