This photo taken on April 3, 2026 shows an exterior view of the U.S. Oracle tech corporation in Dubai, the United Arab Emirates. Iran\u2019s Islamic Revolution Guard Corps IRGC said Thursday that it had hit a data center of the U.S. Oracle tech corporation based in Dubai, the United Arab Emirates. (Photo by Wen Xinnian\/Xinhua via Getty Images)
\nXinhua News Agency | Xinhua News Agency | Getty Images
\nThe Gulf\u2019s ambition to become a global hub for artificial intelligence is being tested, as the potential for a prolonged conflict in the Middle East raises questions over energy security, infrastructure resilience and investor confidence.
\nBefore the war began in February, the United Arab Emirates, Saudi Arabia and Qatar were racing to position themselves at the center of the AI boom, leveraging abundant, low-cost energy and strategic geography to encourage hyperscalers to build out vast data center networks there.
\nBut two Amazon data centers in the UAE were targeted early in the war and, nearly three months later, oil prices remain around $100 a barrel and the Strait of Hormuz remains closed.
\nWhile investors and companies involved in AI infrastructure in the Middle East told CNBC they were bullish about the region\u2019s future in the sector, rising geopolitical risk in the region could impact AI projects, analysts said. Investment decisions into some data center projects in the region have been paused or are taking longer as the conflict continues.
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\n\u201cThe ongoing conflict in the Middle East is putting AI infrastructure on the literal front lines in ways that even a year ago, two years ago, would have seemed out of the realm of possibility,\u201d Trisha Ray, associate director and resident fellow at the Atlantic Council\u2019s Geotech Center, told CNBC\u2019s Dan Murphy on May 15.
\nThe war has \u201cmarked a shift,\u201d she added. Risk management used to focus \u201con cyber threats, digital disruptions, not kinetic threats. And this has changed with the drone strikes,\u201d said Ray.
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\nThe AI bet
\nIn the years before the war, Gulf nations made advanced technology a core pillar of their plans for economic diversification, from sovereign-backed investment vehicles to national AI strategies. At the core of this pitch is energy. The Gulf\u2019s access to abundant hydrocarbons, large-scale generation capacity and relatively low-cost electricity made it an attractive destination for power-intensive data centers that form the backbone of AI and cloud computing.
\nThe UAE backed major initiatives through its AI investment platform MGX and local AI \u201cchampion\u201d G42, both founded by the $385 billion Abu Dhabi investor Mubadala. Saudi Arabia plans to deploy tens of billions of dollars into AI and data infrastructure as part of Vision 2030 through HUMAIN, backed by the Kingdom\u2019s nearly $1 trillion Public Investment Fund. Qatar is also investing heavily in AI and established a national firm called Qai, a subsidiary alongside the nearly $600 billion Qatar Investment Authority, in partnership with Brookfield.
\nAgainst this backdrop, companies like Cisco, Oracle, Amazon Web Services (AWS), Microsoft and Google expanded their investments in projects and data centers in the region alongside local partners.
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\nBut regional conflict is giving AI project builders pause for thought.
\nOaktree-owned Pure Data Center Group CEO Gary Wojtaszek told CNBC in April that the company had temporarily paused investment decisions in the Middle East, while continuing \u201cplanning and discussions\u201d around projects.
\nTimelines are also increasing. Investment decisions \u201care taking longer because of the nature of the risks associated with effectively being in a region that has some serious threats,\u201d said Mark Richards, partner at BCLP, a law firm that advises large-scale data center projects, including in the Middle East.
\nRisks that weren\u2019t part of the original investment thesis were now being priced as part of that process, he told CNBC.
\nEnergy shock
\nGulf markets like the UAE have long offered relatively low industrial power prices, around $0.11 per kWh versus $0.25\u2013$0.40 or more in parts of Europe.
\nThe war has destabilized global energy markets and the effective closure of the Strait of Hormuz has escalated into what the International Energy Agency has called the largest oil supply disruption in history.
\nBrent crude surged more than 55% from around $72 a barrel to nearly $120 at its peak over the last three months.
\nEven in energy-rich states, cheap energy is no longer guaranteed: Gas prices in the UAE jumped 30% for consumers in April after more than a month of sustained higher oil prices.
\nFor the Gulf, the implications are increasingly structural. Tighter energy markets and rising volatility are pressuring governments to pass through costs, particularly to large industrial users such as data centers.
\nStrategic assets
\nLike energy assets across the region, data centers are becoming as strategically important as pipelines. Attacks on AWS data centers in the UAE and Bahrain early in the war were unheard of, and showed the vulnerability of assets which remain a key priority of Gulf governments.
\nThe Atlantic Council\u2019s Ray added that data centers would need to \u201cphysically harden\u201d the sites, and maybe even build them underground. But she also said they should consider \u201cdiversifying\u201d by building them outside the country, \u201cbecause the data center infrastructure the UAE needs to meet its global and regional ambitions, need not just be located in the UAE.\u201d
\nWhen asked if it had paused investment decisions in the region, Amazon pointed CNBC to CEO Matt Garman\u2019s comments in early April about the company\u2019s \u201cexcitement about investing long term in that region is just as strong as it\u2019s ever been.\u201d Google and Microsoft declined to comment. Cisco and Oracle did not respond to a request for comment.
\nWhat now?
\nThe region\u2019s major AI players say the war won\u2019t dent their ambitions.
\nA spokesperson for G42 told CNBC the company\u2019s \u201cdirection remains unchanged,\u201d and their \u201cconviction has only deepened.\u201d
\nIts statement added that AI would \u201cbecome as foundational to economies and societies as electricity.\u201d Infrastructure of that importance has to absorb difficult periods without losing its shape,\u201d G42 added.
\nTareq Amin, the CEO of Saudi Arabia\u2019s HUMAIN, told CNBC the company\u2019s \u201cambition has never been limited to building data centers. We are building the full AI stack – from critical infrastructure and compute, to models, platforms, and AI applications.\u201d
\nAmin added that \u201cSaudi Arabia\u2019s scale is a strategic advantage,\u201d emphasizing its \u201clarge geography\u201d and \u201cabundant energy resources, world-class connectivity corridors, and the ability to build long-term resilient AI infrastructure at scale.\u201d
\n\u201cThe future AI economy will require nations to think beyond isolated facilities and toward integrated infrastructure ecosystems designed for reliability, scalability, and global reach,\u201d Amin added.
\nBCLP\u2019s Richards told CNBC that the firm is still seeing inbound enquiries for large-scale data center projects in the Middle East. Pure DC\u2019s Wojtaszek said the company was \u201cbullish\u201d about the region and was progressing planning and investment discussions about projects in the UAE and Saudi Arabia.
\nThe conflict, though, has \u201cshattered the illusion of long-term stability in the Gulf,\u201d changing the value of investing in the region, Aalok Mehta, director at think tank the Center for Strategic and International Studies, told CNBC.
\nFuture data centers will likely be more expensive and slower to come online because of the costs of facility hardening and anti-drone technology, higher insurance rates and possible long-term supply chain issues, he said.
\n\u201cThe region has demonstrated its ability to change and adapt,\u201d Tara Davies, EMEA co-head of private equity company KKR, told CNBC in Abu Dhabi earlier this month.
\n\u201cAI is changing every month at the moment,\u201d she added. \u201cDespite the short-term volatility in the region and the short-term uncertainty, this is a game that lasts decades.\u201d
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\n#MiddleEastConflict #AIHub #GulfRegion #DataCenters #EnergySecurity #GeopoliticalRisk #UAEAI #SaudiAI #TechInvestment #AIInfrastructure<\/p>\n","protected":false},"excerpt":{"rendered":"
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