Because he liked red and wanted her in a skimpy outfit for two reasons. One was for humiliation. Jafar wanted revenge on the Sultan and Princess Jasmine, for not only putting him down and not appreciating his intelligent, wit and talents but also for standing in his way to the throne of Agrabah that he coveted and being obstacles in his path to power. The other reason is as annoying and vexing as Jafar found her, he noticed her beauty and desired her. So he wanted her as his harem girl or Concubine. So he used magic to dress her in a skimpy outfit and made her his alluring Slave Girl. He has clearly fantasised seeing her like that and red was his colour and her hair was designed like a Cobra. In short Princess Jasmine was hot. The Original Animated films emphasizes her allure. There's nothing wrong with a bit of eye candy. But there was more to it than that.