What the Iran War Is Costing Joint Gulf-U.S. Ambitions for AI

A Partnership Built on More Than Oil

For decades, Gulf states invested trillions into the U.S. economy, tied their security to Washington, and bet that alignment was the price of protection. The Iran war raised a clear question: Was alignment the cause of the threat, rather than the cure for it? Gulf governments did not start this war, but are clearly paying for it, and they are asking why.

By early 2026, the relationship between the United States and the Gulf states had moved well beyond the old oil-for-security bargain. Saudi Arabia, Qatar, and the United Arab Emirates (UAE) had collectively committed roughly $2.5 trillion to U.S.-linked technology investments. Amazon had committed $5.3 billion to an AI hub in Riyadh. Nvidia was supplying up to 600,000 GPUs through its partnership with Saudi Arabia’s Humain. The UAE’s MGX had become a founding partner in the Stargate Project alongside OpenAI, SoftBank, and Oracle. Saudi Arabia, Qatar, and the UAE were collectively targeting 8–10 gigawatts of AI compute capacity across announced projects, a buildout that would position the Gulf as a principal architect of the computational substrate of the twenty-first century. The architecture was elegant, ambitious, and historic.

The war has likely changed the calculus.

A Generation-Defining Transformation, Interrupted

Through Saudi Arabia’s Vision 2030, Qatar’s sovereign capital deployments, the UAE’s AI strategy, and others, Gulf governments had been executing long-term development strategies centered on AI, advanced computing, and digital infrastructure. These are serious, institutionally backed bets on long-term economic resilience. The stakes extend beyond national balance sheets: AI ecosystems anchored in the Gulf have the potential to lower barriers for firms, researchers, and governments across the broader Arab world, enabling participation in advanced digital industries that might otherwise remain out of reach. That ambition is now under threat.

Iranian strikes on Gulf energy infrastructure, ports, aviation networks, and major cities challenged the basic premise behind the region’s transformation agenda. For years, foreign investors treated the Gulf as an unusually stable platform; the attacks shattered that assumption. Goldman Sachs projected that a prolonged conflict could shrink Kuwait’s and Qatar’s GDP by as much as 14 percent each, while reducing Saudi Arabia’s and the UAE’s by roughly 3 and 5 percent, respectively. Human capital risk compounds the economic damage: When airspace closes, insurance costs rise, and drones target major cities, expatriate executives and engineers begin to reassess the bargain. The effect is gradual but real. Over time it weakens the institutional depth these reform agendas require.

The Cost of Alignment

The more damaging long-term consequences may not be physical, but rather strategic and psychological. Gulf governments did not initiate this conflict, and yet some absorbed its consequences far more directly than others. The UAE made the most explicit bet by signing the Abraham Accords and integrating substantively with the Israeli intelligence and security apparatus. Saudi Arabia, Qatar, and Kuwait maintained more hedged postures, and were targeted accordingly with less ferocity. That distinction is not lost on anyone in the region.

Inside Gulf governments and royal courts, analysts and senior advisers are now asking questions that would have been heretical two years ago: Did alignment purchase security, or did it paint a target on Gulf infrastructure and populations? The question is not rhetorical. The same Amazon Web Services (AWS) infrastructure hosting Gulf banking and civil services was simultaneously processing targeting data for U.S. military operations, which Gulf governments were not meaningfully consulted about before the strikes began. Gulf states sought data sovereignty; what they got was closer to its inverse. Iran concluded that datacenters were fair game, publishing a list of 29 tech targets across Bahrain, the UAE, Qatar, and Israel—AWS, Microsoft, Google, Nvidia, Oracle, and Palantir facilities—framing them as legitimate military infrastructure. 

Gulf sovereign wealth funds represent some of the largest concentrations of deployable capital outside of the United States. When Gulf governments begin to question whether U.S. partnerships are worth the security exposure they entail, that capital slows or redirects.

When Datacenters Are in the Crosshairs

The Strait of Hormuz carries roughly one-fifth of global oil and gas trade. When Iran closed it after the February strikes, Saudi Arabia, the UAE, Iraq, and Kuwait together lost an estimated 6.7 million barrels per day of export capacity. Strikes on QatarEnergy facilities at Ras Laffan halted liquefied natural gas production and pushed European gas prices to a four-year high. For the Gulf states, higher prices offered no consolation. The shock struck the very infrastructure that allows them to profit from rising crude. Bahrain’s credit outlook was downgraded by Moody’s, illustrating how quickly a regional security shock becomes a sovereign risk problem.

The technology damage may prove more lasting. Iranian drone strikes hit three AWS datacenters, two in the UAE and one in Bahrain, disrupting banking, payments, and consumer services across a region of 50 million people and prompting AWS to advise clients to consider migrating workloads out of the Middle East. The subsea cables connecting Gulf facilities to Africa, South Asia, and Southeast Asia pass through the Red Sea and the Strait of Hormuz, which are both vulnerable in the conflict. Companies poised to break ground on new datacenter projects are confronting questions that did not appear in January’s due diligence frameworks: What does war risk insurance look like at scale? By what fiduciary logic does a board ratify 10-year infrastructure commitments in a theater under active ballistic and drone threat? That said, Brookfield Asset Management has confirmed its $20 billion datacenter partnership with the Qatar Investment Authority will go ahead, a signal that sovereign, long-horizon capital is not retreating. 

Buyers’ Remorse: What the Gulf Wants and Why That Helps Americans

The likeliest outcome of this reckoning is a deliberate recalibration toward greater strategic autonomy, not a dramatic rupture in policy. The political and military costs of deep alignment have become too visible to ignore, particularly for the states that went furthest. Qatar and Kuwait, which preserved more independent foreign policy postures, offer a model: robust economic engagement globally, without the full strategic exposure that comes from explicit political and military aggression. A more balanced posture across the Gulf, preserving economic partnerships while refusing to absorb the full consequences of decisions made without meaningful input, is the rational response to a situation in which alignment demonstrably increased vulnerability rather than reduced it.

That recalibration is unlikely to redirect Gulf technology investment. What Gulf governments want, at a basic level, is to build, to diversify, to invest in their people, and to create the conditions under which a young, growing Arab population can participate in the industries shaping the twenty-first century. What they do not want is the constant instability that drains the capital, talent, and institutional energy that would otherwise go toward long-term diversification. That aspiration is consistent with U.S. interests. The United States would be well served to reconceptualize Gulf stability not as a concession to regional partners but as a structural prerequisite for the economic architecture both parties spent years building together. Washington should recognize that Gulf leaders who invested trillions of dollars into the United States over decades and feel endangered by U.S. partnership will look for better terms elsewhere. 

Joseph A. Farsakh is a senior associate (non-resident) with the Middle East Program at the Center for Strategic and International Studies (CSIS).