Hormuz disruption threatens AI hub ambitions, OECD warns

• ‘Dark scenario’ for global economy
• Projects could be delayed
• Physical threat to sites

A prolonged Middle East conflict could delay the Gulf’s ambitions to become a global powerhouse in artificial intelligence, the Organisation for Economic Cooperation and Development (OECD) has warned.

Countries including Saudi Arabia and the UAE are pouring billions of dollars into building data centres with the backing of sovereign wealth funds and government investments.

But failure to reach an Iran-US peace deal could scupper these plans as countries grapple with disruptions to energy supplies, trade routes and investment flows as a result of the virtual closure of the Strait of Hormuz, the OECD said in its latest Economic Outlook.

“Large-scale AI infrastructure projects, including multi-gigawatt data centres and campuses, are closely linked to sovereign wealth funds and state-backed capital,” the report said.

“Prolonged geopolitical tensions could delay or halt these projects, affecting global inference capacity expansion and its geographic distribution.”

The AI analysis came as the OECD also warned of a “dark scenario” that could grip the global economy if the Gulf energy crisis drags on into the second half of 2027.

If the flow of fossil fuels from the Gulf is disrupted until late next year, global growth would drop to 2.1 percent in 2026 and 1.8 percent in 2027, it said.

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Even if the crisis is resolved soon, global growth will fall this year to 2.8 percent from 3.4 percent in 2025.

AI investment has soared worldwide and become a pillar of diversification efforts for countries keen to reduce their dependence on fossil fuel exports.

There are a slew of projects in the pipeline throughout the Gulf, but several major projects are located in Saudi Arabia and the UAE.

Saudi Arabia has used its Vision 2030 economic plan to position itself as a global AI hub. Its projects include the $2.7 billion Hexagon Data Centre in Riyadh, which is set to be the world’s largest government-owned facility, and a vast cloud data centre region with Microsoft Azure known as Saudi Arabia East that is due to launch later this year.

Last year, the kingdom’s futuristic giga-project Neom signed a $5 billion deal to develop what it describes as the world’s first sustainable data centre. The first phase has a capacity of 1.5 gigawatts (GW) and will be operational from 2028.

The UAE’s initiatives include Stargate UAE with ChatGPT creator OpenAI, which will build a 1GW supercomputing campus in Abu Dhabi.

A gigawatt of energy is enough to power about 750,000 homes, but major data centres may require this amount of dedicated, continuous energy to run their day-to-day operations.

Gulf countries are ramping up investments in renewables to help power ever-expanding grids, in part to service energy-guzzling data centres.

There are a number of ways in which a longer conflict between the US, Israel and Iran could cause problems for technology projects worldwide, the OECD said.

Higher energy prices will increase operating costs for data centres and disruption to exported commodities such as helium, used in manufacturing, could have a knock-on effect on the production of semiconductors and other hardware.

But Gulf Cooperation Council member states – the UAE, Oman, Bahrain, Qatar, Saudi Arabia and Kuwait — are also contending with spending vast sums to rebuild energy facilities damaged during the Iran war.

Analysts say the repair bills could also impact overseas energy investments.

Growth in Middle East data centres was forecast to hit 63 percent annually during the next two years, driven by Saudi Arabia and the UAE, according to Knight Frank research published before the war broke out on February 28.

The OECD added that there remains a physical threat to AI and data centre sites, after drone attacks on web services facilities in the UAE and Bahrain disrupted regional cloud services in March.