Two Amazon data centres in the UAE were hit by drones. The Gulf's AI ambitions are being tested.

Two Amazon Web Services data centres in the UAE were targeted early in the Middle East conflict. Nearly three months later, oil remains around $100 a barrel and the Strait of Hormuz is closed. Gulf states had been positioning for AI growth using low-cost energy, strategic geography, and sovereign wealth to attract hyperscalers. Investment decisions for some data centre projects have been paused or slowed due to newly priced security risks from operating in a region with serious threats. Energy economics have also worsened as the war destabilised global energy markets, with Brent crude rising sharply and UAE gas prices increasing for consumers.

"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 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."

"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.""

"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."

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