The UAE, Saudi Arabia and Qatar were supposed to be the next center of the AI boom, with cheap energy, big sovereign checkbooks, and a friendly geography for hyperscalers building the world's largest data centers.
Then Iran's war started in February. Drone strikes hit two Amazon data centers in the UAE, and the pitch hasn't changed but the risk has.
For years, the threat list for data centers ran cyberattacks, power outages, and cooling failures, with drone strikes never on it.
That changed in February when two AWS sites in the UAE were targeted early in the war. Iran's Islamic Revolutionary Guard Corps said in May it had hit an Oracle data center in Dubai, while an AWS site in Bahrain was attacked as well.
"The 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," Trisha Ray of the Atlantic Council's Geotech Center told reporters.
Ray added that data centers may need to physically harden sites, and that some operators are even discussing building underground.
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The whole reason hyperscalers liked the Gulf was power, with UAE industrial electricity at around $0.11 per kilowatt-hour while parts of Europe run two to four times that.
Then Brent crude surged 55% from $72 to nearly $120 at the peak, and UAE consumer gas prices jumped 30% in April.
The International Energy Agency called the Strait of Hormuz closure the largest oil supply disruption in history. The cheap-energy pitch isn't gone, but it's not as obvious as it was three months ago.
Pure Data Center Group CEO Gary Wojtaszek paused some investment decisions in the region in April, while Mark Richards of law firm BCLP said deal timelines are stretching because risks that were never priced in, like physical attacks on infrastructure, now have to be.
The big regional players say nothing has changed. UAE's G42 says its "conviction has only deepened", while Saudi Arabia's HUMAIN, backed by the country's nearly $1 trillion sovereign fund, says it's still building the full AI stack.
Amazon points to comments from AWS chief Matt Garman in April that the company's excitement about the region "is just as strong as it's ever been". The money still wants to be in the Gulf, but the price it wants to pay to be there is going up.
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