The Gulf’s AI Ambitions Face a Real Stress Test
The Gulf was supposed to power the AI boom. Then the war started.
May 24, 2026 – 4:19 pm
Image by: Kavali Chandrakanth KCK
TL;DR
Drone strikes hit AWS data centres in the UAE. Oil surged 55%. Gulf AI investment decisions are pausing as the region’s risk profile changes.
Two Amazon Web Services data centres in the UAE were targeted early in the Middle East war. Nearly three months later, oil prices remain around $100 a barrel and the Strait of Hormuz remains closed. The Gulf’s ambition to become a global AI hub is facing its first real stress test.
Before the Conflict
Before the conflict began in February, the UAE, Saudi Arabia, and Qatar were racing to position themselves at the centre of the AI boom. Abundant, low-cost energy, strategic geography, and sovereign wealth backing made the region an attractive destination for hyperscalers building data centre networks. That proposition has changed.
Paused Investments
Investment decisions into some data centre projects have been paused or are taking longer. Pure Data Center Group CEO Gary Wojtaszek told CNBC the company had temporarily paused investment decisions in the Middle East. Mark Richards, partner at law firm BCLP, said decisions “are taking longer because of the nature of the risks associated with effectively being in a region that has some serious threats.”
Shifting Energy Economics
Risks that were not part of the original investment thesis are now being priced into the process. The Atlantic Council’s Trisha Ray put it bluntly: “The ongoing conflict in the Middle East is putting AI infrastructure on the literal front lines in ways that even a year ago would have seemed out of the realm of possibility.”
The energy economics have shifted. Gulf markets previously offered industrial power at around $0.11 per kWh versus $0.25 to $0.40 in parts of Europe. The war destabilised global energy markets. The IEA has called the effective closure of the Strait of Hormuz the largest oil supply disruption in history.
Brent crude surged more than 55% from around $72 to nearly $120 at its peak over three months. UAE gas prices jumped 30% for consumers in April. Even in energy-rich states, cheap power is no longer guaranteed for large industrial users like data centres.
Drone Strikes and Strategic Importance
The drone strikes on AWS facilities marked an unprecedented escalation. Data centres are becoming as strategically important as oil pipelines. Ray said future facilities would need to be physically hardened, potentially built underground, or diversified by building outside the country entirely.
The threat is not theoretical. Iran’s Islamic Revolutionary Guard Corps released satellite footage of OpenAI’s Stargate campus in Abu Dhabi and designated it a potential military target. The Gulf’s AI infrastructure is now part of the region’s strategic calculus in ways it was never designed to be.
Optimistic Players
Despite the challenges, major Gulf AI players say the war will not dent their ambitions. G42, the UAE AI champion backed by Mubadala, said its “conviction has only deepened.” Saudi Arabia’s HUMAIN CEO Tareq Amin said the company is “building the full AI stack” and that the Kingdom’s “scale is a strategic advantage.” KKR’s Tara Davies said “this is a game that lasts decades.”
Conclusion (as originally quoted)
But the CSIS think tank notes: “This conflict has made clear that there are no safe havens for AI. The region’s economic power and political importance as a hub of global data flows mean it will remain a target.”