The global AI industry runs on a supply chain with almost every critical link passing through one of the most unstable regions on Earth. Advanced memory and training chips - the most expensive components of any AI model - are produced by just two companies in South Korea and one in Taiwan. Both countries get the bulk of their crude oil and liquefied natural gas from the Persian Gulf, "Hvylya" reports, citing an analysis by The Atlantic's Matteo Wong and Charlie Warzel.
The Strait of Hormuz, now functionally closed to most shipping, carries one-fifth of the world's natural gas exports, one-third of crude oil exports, and significant quantities of helium and sulfur - three key inputs to silicon wafer production. Sam Winter-Levy, a technology and national security researcher at the Carnegie Endowment for International Peace, told The Atlantic that the strait is "critical to basically every aspect of the global economy." The AI supply chain, he said, "is not insulated."
Chip manufacturers also rely on bromine largely sourced from the region. A helium crunch alone could trigger a shortage of AI chips or send prices soaring. Without affordable chips, new data centers would sit empty and existing ones would have almost no hope of turning a profit. The chain reaction runs from raw materials through semiconductor fabrication to the trillion-dollar valuations that currently hold up global stock markets.
Saudi Arabia, Qatar, the United Arab Emirates, and other regional petrostates have also become key investors in American AI firms. The war has not only disrupted supply routes but damaged the economic health of the petrostates themselves, putting a second kind of pressure on the same companies from the opposite direction. In just one month of fighting, Brent crude has jumped 40 percent, LNG prices are soaring across Europe and Asia, and helium spot prices have already doubled.
Paul Kedrosky, an investor and financial consultant, described the situation as a system with "too many ways for it to fail for it not to fail." Unlike past financial crises built around a single sector, this one involves interlocking fragilities across energy, manufacturing, finance, and geopolitics - all converging on the same industry at the same time.
Also read: how China's energy strategy exposed the assumption European policymakers got catastrophically wrong.