Drone attacks hit Amazon data centers in UAE. Oil surges 55%. AI investment decisions in the Gulf freeze as the region's risk profile changes.
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Two Amazon Web Services data centers 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 test.
Before the conflict began in February, the UAE, Saudi Arabia and Qatar were competing to position themselves at the center of the AI explosion. Abundant, low-cost energy, strategic geography and support from state funds made the region an attractive destination for hyperscalers building networks of data centers. That proposition has changed.
Investment decisions for some data center projects have been frozen or are taking longer. Pure Data Center Group CEO Gary Wojtaszek told CNBC that the company had temporarily frozen investment decisions in the Middle East. Mark Richards, a partner at law firm BCLP , said the decisions “ are taking longer because of the nature of the risks associated with being in a region that has serious threats. ”
Risks that weren’t part of the original investment case are now being built into the process. Trisha Ray of the Atlantic Council put it simply: “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 beyond the realm of possibility.”
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Brent crude rose more than 55% from around $72 to nearly $120 at its three-month peak. Natural gas prices in the UAE rose 30% for consumers in April. Even in energy-rich nations, cheap energy is no longer guaranteed for large industrial users like data centers.
The drone attacks on AWS facilities marked an unprecedented escalation. Data centers are becoming as strategically important as oil pipelines. Ray said future facilities will need to be physically fortified, possibly built underground or diversified by building them outside the country entirely.
The threat is not theoretical. Iran’s Islamic Revolutionary Guard Corps released satellite images of OpenAI’s Stargate campus in Abu Dhabi and labeled 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.
The Gulf’s big AI players say the war won’t dampen their ambitions. G42, the UAE’s AI champion backed by Mubadala, said its “confidence has only deepened.” Saudi Arabia’s HUMAIN CEO Tareq Aminsaid the company is “building the full AI stack” and that theKingdom’s “scale is a strategic advantage.”
The energy problem for AI infrastructure is global, not just regional. OpenAI froze its Stargate project in the UK because of industrial electricity prices that are more than four times higher than in the US. xAI is spending $2.8 billion on gas turbines because it can’t secure clean energy fast enough. The Gulf was supposed to be the answer to these problems: cheap energy, government support, and fast licensing.
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The war has reintroduced a variable that investment models didn’t factor in. Amazon referred CNBC to CEO Matt Garman’s comments about thecompany’s “enthusiasm for long-term investments in this region.”
