Iran Conflict Raises Security Concerns for Gulf’s Expanding AI Industry

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The growing conflict involving Iran has introduced new security risks for the Gulf’s rapidly expanding artificial intelligence sector, placing renewed focus on the resilience of regional data infrastructure and the United States’ strategy to strengthen AI partnerships across the Middle East.

Iranian drone strikes in March reportedly damaged two Amazon Web Services (AWS) data centers in the United Arab Emirates and disrupted another facility in Bahrain, causing temporary interruptions to banking and cloud-based services. Although investment activity has largely remained intact, the incidents underscored the vulnerability of critical AI infrastructure as geopolitical tensions intensify.

Later that month, Iran’s Islamic Revolutionary Guard Corps (IRGC) declared U.S. technology companies and facilities operating in the Gulf to be legitimate military targets. The warning comes as Washington deepens its AI collaboration with Gulf nations through strategic investment agreements aimed at strengthening regional technological capabilities while reducing reliance on Chinese technology providers.

In May 2025, U.S. President Donald Trump signed a major AI cooperation agreement with the UAE as part of broader investment commitments exceeding $200 billion. The initiative was designed to position the United States as the UAE’s preferred AI partner. A similar Strategic AI Partnership with Saudi Arabia followed, leveraging the Kingdom’s $100 billion Alat technology investment fund to accelerate AI development.

Beyond commercial benefits, these agreements carry significant geopolitical importance. Washington has sought to encourage Gulf countries to align with U.S. technology ecosystems by limiting the use of Chinese AI products, including those developed by Huawei. As part of that shift, Abu Dhabi-based AI company G42 reduced its ties with Chinese firms to secure broader access to advanced U.S. AI chips.

The strategic importance of Gulf data centers has grown further as the U.S. acknowledged deploying AI technologies, including Anthropic’s Claude and Palantir’s Maven systems, in support of decision-making during the Iran conflict, placing regional digital infrastructure under greater scrutiny.

Industry experts say the rapid global demand for AI computing capacity continues to make the Gulf an attractive destination for hyperscale data center investments. According to Mike Sexton, Senior Policy Adviser for AI at Washington-based think tank Third Way, expanding economic partnerships with Gulf nations creates incentives for them to prioritize collaboration with U.S. technology companies over Chinese alternatives.

The Gulf’s abundant capital and relatively low energy costs have strengthened its appeal for AI infrastructure projects. June Park, Senior Research Affiliate at the Centre for Digital Law at Singapore Management University, noted that countries such as the UAE view artificial intelligence as a critical pillar for economic diversification beyond hydrocarbons.

However, access to advanced AI hardware remains subject to strict U.S. export controls. Washington requires Middle Eastern governments to provide assurances that cutting-edge AI chips will not be transferred to Chinese entities before export approvals are granted.

The UAE has reinforced its alignment with U.S. technology standards by joining the State Department’s Pax Silica initiative, allowing approved government organizations and companies such as G42 to acquire advanced AI processors from Nvidia and AMD without seeking individual export licenses. Saudi Arabia’s state-backed AI company HUMAIN has also received authorization to import advanced U.S. AI chips, provided it complies with stringent security and reporting requirements.

Despite closer cooperation with Washington, analysts believe Gulf nations are unlikely to abandon technology partnerships with China entirely. Many countries continue to balance relationships with multiple global technology providers as part of broader economic and strategic diversification efforts.

G42’s financial backing from Abu Dhabi’s sovereign wealth fund Mubadala further illustrates this balancing approach. Mubadala maintains substantial investments in China and participates in joint investment initiatives supporting infrastructure and advanced technology development between the UAE and China.

Experts describe this approach as a pragmatic hedging strategy, allowing Gulf countries to strengthen partnerships with the United States while preserving valuable commercial ties with Beijing.

Competition between U.S. and Chinese AI technologies is also intensifying. Chinese open-source models such as DeepSeek have gained attention for delivering competitive performance at significantly lower costs than leading U.S. systems, although concerns remain regarding content restrictions on politically sensitive topics.

Analysts argue that as the United States expands AI partnerships globally, maintaining strong ethical standards and ensuring AI technologies are not used to reinforce authoritarian practices will remain an important policy challenge.

At the same time, both China and the UAE are increasingly turning to nuclear energy to power energy-intensive AI infrastructure. While the UAE’s Barakah Nuclear Energy Plant provides a significant advantage for future AI growth, experts caution that expanding nuclear capacity could introduce additional geopolitical sensitivities as competition for AI leadership continues to intensify.