Live updates: Follow the latest on Israel-Gaza
Houthi-controlled areas were bracing for the prospect of regular missile, drone and aerial attacks on Sunday, after the first Israeli air strikes in Yemen since the war in Gaza started.
Residents of Houthi-controlled Hodeidah woke up to palls of black smoke over their port city, while in Eilat, Israel, air-raid sirens sounded.
Both Yemenis and Israelis are now facing a wider war between the two countries.
A resident of Hodeidah told The National the entire city was engulfed in smoke, the density of which increased closer to the port hours after Israel's counter-strike on Saturday. The attacks left fuel depots blazing, turning parts of the horizon fiery red and black.
The Israeli strikes followed a Houthi explosive drone attack in Tel Aviv in the early hours of Friday, which killed a man in her home and injured four others.
At least six people were killed and 80 injured in Israel’s counter-strike, according to the country’s health ministry.
The foreign ministries of Kuwait and Oman have denounced the unprecedented Israeli attacks, which Kuwait said contribute to the “deterioration of the security situation in the region and undermine international efforts aimed at ending the cycle of violence”.
In a statement on social platform X, Oman described the bombing as a representation of "a new escalation of tension in the region that would further complicate the regional situation and hinder efforts towards calming it".
Fuel blazes at port
Petrol stations reopened in Hodeidah on Sunday morning after an announcement that there are reserves in the Yemeni port and no chance of fuel shortages. Electricity supplies, which were cut off overnight, returned in the morning, although some commercial buildings were still reporting no power.
Amal, 36, is married to an employee who works in Ras Issa port, which was hit hard in the Israeli attacks.
"I heard the explosions like everyone else, and we went up to the roof and saw the smoke. It wasn't hard to determine that the strikes were at the port."
"My husband works in Ras Issa, and I feared that the facilities there might have been hit too. I broke down, and my children were scared for their father. It was a nightmare I will never forget," she said.
"He arrived home this morning after evacuating the facilities and stopping work until the situation calms down. But I am not reassured and do not expect the situation to calm down."
As Yemen's principal port, Hodeidah has been crucial for the survival of millions of citizens, making it a focal point of humanitarian efforts and military conflict.
Even before the war, it handled most imports in a country where 90 per cent of food had to be imported. But after Hodeidah was taken over by Iran-backed Houthi militias, Yemen's internationally recognised government has long accused the rebel movement of controlling the distribution of supplies from the port, deciding who benefits from foreign aid.
A major element of contention in the Yemeni conflict has been the restrictions on the import of fuel and humanitarian goods into Yemen, where millions of people are on the brink of famine.
Early last month, US and UK forces carried out joint air strikes on Hodeidah's airport and another attack was launched on the seaport of Salif to the north, in retaliation for the Houthis' targeting of shipping vessels in the Red Sea.
Eilat alert
Israel was also on high alert on Sunday, with air raid sirens sounding in Eilat after the air strike on Hodeidah. Eilat has frequently been a target of Houthi cruise missiles, drones and ballistic missiles.
Both sides are now embroiled in an unprecedented exchange of fire.
Amid fears of the Israel-Gaza conflict spreading across the region, Saudi Arabia on Sunday said it had no role in Saturday’s Israeli attack on Yemen.
Saudi Ministry of Defence spokesman Turki Al Malki said Riyadh “will not allow its airspace to be infiltrated by any party”.
On Sunday, Israel said it had shot down a Houthi missile.
Wider war threat
Israeli leaders said retaliation would follow any more Houthi attacks.
Prime Minister Benjamin Netanyahu said Hodeidah was a legitimate military target. “The port we attacked is not an innocent port,” he said. “It was used as an entry point for deadly weapons supplied to the Houthis by Iran.”
Defence Minister Yoav Gallant also issued a statement directed at the Houthis but with an implicit threat against their backer Iran and Tehran's regional allies.
“The Houthis attacked us over 200 times. The first time that they harmed an Israeli citizen, we struck them. And we will do this in any place where it may be required.”
“The fire that is currently burning in Hodeidah is seen across the Middle East and the significance is clear,” he added.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
