OVERVIEW
The escalation of conflict in the Middle East introduces a new macroeconomic and geopolitical variable into an already fragile global technology environment. While IDC does not comment on political dynamics, the technology sector implications are immediate and measurable. Based on early regional intelligence and IDC’s macroeconomic modeling framework, we see six primary impact vectors on IT spending: energy price volatility, cloud and data center resiliency, sovereign infrastructure acceleration, cybersecurity, supply chain, and shifts in consumer and enterprise investment sentiment. Given the early and rapidly developing nature of this situation, we are focusing most of our scenario analysis and forecasts on a war limited to the middle east which lasts for less than 3 months. We won’t be publishing scenario data for a longer timeline at this stage. As we continue to monitor the situation, we’ll decide whether the likelihood of that longer timeline becomes clearer and more relevant.
In a downside scenario where the conflict lasts for up to 3 months, the impact on IT spending would be measurable but relatively moderate. Service providers are likely to maintain aggressive investment plans for AI infrastructure deployment at global scale, even in the context of a weakening macroeconomic environment. A relatively short conflict would have limited impact on demand for cloud services and enterprise software, but returning inflationary pressures could put a drag on device upgrades and some discretionary spending.
In this downside scenario, global IT spending would grow by around 9% in 2026, versus our baseline forecast of 10% growth. A longer conflict would have a more pronounced impact on IT spending but is currently more difficult to predict.
IT spending in the Middle East and Africa region was $155 billion in 2025, representing 4% of the global market, and is currently forecast to increase by 5% in 2026. This is lower than global growth, due to memory price pressures on device markets which make up a larger share of IT spending in the region.
In a downside scenario where the conflict is resolved within 3 months, IT spending growth in MEA would fall into the range of 3-4% this year, with negative implications for business and investor confidence in the short term. The impact at country level would be extremely mixed, reflecting oil supply dynamics and other factors. A longer conflict would have a greater impact.
However, we currently maintain our baseline forecast which assumes a short conflict that will be less disruptive for underlying IT demand including AI infrastructure deployment, cloud migration and ongoing digital transformation initiatives. We will continue to monitor and update as the situation develops.
Below is IDC’s structured assessment of the near- and mid-term implications for IT spending across the Middle East and globally.
1. Energy Price Shock: The Primary Transmission Mechanism
Oil prices rose 7–8% immediately following the escalation, with Brent crude moving toward the $70–$80 range. IDC’s IT spending model has an oil price baseline average in the $65-75 range. IDC’s model assumes average oil prices will rise between $75-85 based upon a 3-month conflict and if the conflict last longer, IDC expects oil prices to inch close to $100 or more.
Amplifying supply side concerns is the shutdown of Aramco refinery production—reportedly impacting approximately 500,000 barrels per day. Qatar Energy has temporarily stopped gas production, which has escalated gas prices in Europe to 40-50% higher. If the war continues for an extended period of time, the input costs will greatly increase for those countries that heavily rely upon gas and oil from the region.
Energy price volatility is the most significant macro transmission through which this conflict will impact overall IT spending assumptions for 2026. Energy price increases will create new inflationary pressures and could have a significant impact on central bank monetary policy. Business and consumer confidence remain extremely fragile, following the period of high inflation in recent years, while IT products are also facing inflationary pressures from memory component shortages. Rising prices may result in spending delays and reallocations.
IT Spending Implications
Global Level
- Higher energy prices increase operating costs for data centers, semiconductor fabrication, logistics, and manufacturing.
- Sustained inflation may delay interest rate cuts, tightening capital availability for enterprise IT projects; and negatively impact business and consumer sentiment for IT purchases.
- Input cost pressures could trigger reprioritization of AI and digital transformation initiatives.
Regional (Middle East)
- Prolonged conflict and defense expenditures could offset surplus revenues from oil price increases, postponing spending on technology investments.
- Only mandatory technology spending to support business continuity, strengthen cybersecurity, and adoption of sovereign infrastructure will be prioritized.
- Government-led digital transformation programs may be sustained in wealthier Gulf states but face reprioritization elsewhere.
2. Cloud & Data Center Resiliency Becomes a Strategic Imperative
This war marks the first time where major cloud provider regions and availability zones are operating in an active conflict zone. A series of strikes on multiple facilities of a global cloud provider within multiple availability zones in first few days highlights architectural resiliency, but also the potential vulnerability of cloud environments in a period of sustained conflict. IDC projects that investments in cloud, storage and data center architecture will be an investment priority. However, data center construction is capital intensive and multi-year. Rising construction costs, higher financing costs, and supply chain friction could slow execution timelines.
Key Structural Shifts
- Multi-Availability Zone (AZ) architecture becomes the minimum standard for enterprises and SaaS providers using public clouds. Multi-region becomes a best practice.
- Risk modeling for cloud deployments by multinational entities will expand from country-level to regional resiliency frameworks.
Middle East Impact
We expect:
- Acceleration of locally owned sovereign cloud and domestic datacenter investments with built-in redundancy.
- Increased hyperscaler commitments to multi-AZ, physically separated infrastructure (e.g., three-AZ designs vs. single-AZ footprints).
Global Impact
Globally, this event resets expectations around:
- Cloud recovery planning.
- Resilient data center infrastructure
- Geographic dispersion strategies.
- Risk premiums embedded in infrastructure investment decisions.
While long-term cloud investment may increase, near-term project pacing could slow as enterprises reassess architecture.
3. Sovereign Infrastructure and Strategic Autonomy
Digital sovereignty was already a defining force in cloud strategy across the Gulf as countries prioritize digital self-determination for their organizations and citizens. Even at this early point in the conflict, governments across the Gulf, particularly capital-rich states, are likely to accelerate investment in sovereign digital infrastructure and distributed cloud models to strengthen agility, resilience, and long-term survivability. They will focus on:
- Sovereign cloud platforms
- National Public AI infrastructure
- Enhanced Cybersecurity systems and response practices by government entities
Countries will increasingly focus on creation of a Critical infrastructure resilience model that aligns with a broader push for “strategic autonomy” and reduces over-reliance on foreign infrastructure providers:
- Shared public: Share infrastructure, global operations
- Dedicated public: Dedicated region, shared operations with local partner
- National public: Owned & operated by a local cloud service provider
- Managed private: Customer of provider hosted, provider managed
- Air-gapped private: Isolated, customer operated
4. Supply Chain: Memory Supply, Smart Munitions, and Semiconductor Pressure
The Middle East plays a crucial role in the global technology supply chain: both as an energy artery and as a logistics and transshipment hub. Any closure or sustained disruption of the Strait of Hormuz would represent a high-severity, low-frequency shock with material implications for global IT markets.
The Strait of Hormuz carries roughly 20% of global oil shipments and a meaningful share of liquefied natural gas (LNG) flows. The most immediate effects of the strait disruption would be to drive energy cost increases resulting in gas price spikes affecting Europe and Asia, higherdata center operating expenses, and increased semiconductor fabrication energy costs. Strait disruptions would also affect shipping and logistics, with expectations for elevated logistics and air freight costs, delays in inbound components destined for consumer technology assembly and distribution, and interruptions to outbound shipments into Africa and parts of Europe.
The strait also underpins major shipping lanes serving Gulf ports such as Jebel Ali (UAE), Dammam (Saudi Arabia), and Hamad Port (Qatar)—critical nodes for re-export of all types of products (including technology products and components) into Africa, South Asia, and parts of Europe.
The global memory market was already constrained prior to escalation. This conflict could exacerbate an already tight memory environment, creating ripple effects across the global IT hardware ecosystem.
Recent efforts to regionalize manufacturing—such as Lenovo’s Saudi-based manufacturing expansion—highlight the Middle East’s increasing role in the global tech supply chain
Risks include:
- Logistics disruption through Gulf shipping routes
- Delays in new manufacturing hubs
- Increased insurance and freight costs
A sustained conflict would drive a spike in military consumption of advanced semiconductors and memory in smart munitions and drone systems and could trigger additional state interventions to secure semiconductor supply for national security purposes. These would introduce additional upward pressure on DRAM and NAND pricing, AI accelerator memory configurations, and Enterprise storage infrastructure costs. Enterprises planning AI deployments may re-evaluate project sequence if hardware costs rise further. Consumer device pricing is also at risk.
The broader effect will depend on the duration and geographic containment of the war. If the war is resolved within weeks, short-term disruption would likely be followed by rapid recovery. A longer conflict would have more serious implications for regional and worldwide market conditions.
5. Cybersecurity: Immediate Escalation and Structural Spending Growth
Geopolitical conflict materially elevates cyber risk. State-sponsored and proxy cyber activity typically increases during periods of military escalation, targeting:
- Energy infrastructure
- Financial services
- Telecommunications
- Government systems
- Cloud platforms and SaaS providers
The Middle East has already been a focal point for advanced persistent threat (APT) activity. Escalation raises both attack frequency and sophistication.
Immediate IT Spending Impacts
1. Acceleration of Security Budgets
Security is typically one of the last IT budgets to be cut in uncertain environments. In this context, it is likely to expand. Enterprises and governments will increase spending across:
- Managed detection and response (MDR)
- Security operations center (SOC) modernization
- Zero-trust architecture
- Endpoint detection and response (EDR)
- Cloud workload protection
- Identity and access management (IAM)
2. Infrastructure Hardening
Critical infrastructure operators—energy, utilities, transportation—will increase investment in:
- Operational technology (OT) security
- Network segmentation
- Air-gapped recovery environments
- Backup and cyber recovery vaults
3. Cloud Security Uplift
As cloud environments become strategic targets, enterprises will:
- Increase investment in cloud security posture management (CSPM)
- Expand multi-region backup strategies
- Demand higher transparency from hyperscalers regarding resilience and incident response
Regional vs. Global Effects
Middle East
- Government-led cybersecurity programs will expand.
- Sovereign cyber defense capabilities will receive additional funding.
- Cyber resilience has become integrated into national digital transformation programs.
Global
- Multinational enterprises with regional exposure will raise cyber defense spending.
- Insurance costs for cyber coverage may rise, reinforcing investment in risk mitigation.
- Defense-related cybersecurity and secure communications markets will grow.
Cybersecurity emerges as a relative beneficiary within overall IT spending, even if broader macro conditions soften total growth rates. Even in a scenario of a longer conflict, security investments would remain relatively resilient.
6. Consumer Technology Spending and Sentiment
Consumer IT spending was already under pressure due to persistent inflation and memory-related device cost increases. Escalation adds:
- Consumer sentiment deterioration, with consumer confidence still extremely fragile.
- Higher device prices due to input costs
- Supply chain disruption risk
The Middle East also serves as a transshipment hub—particularly through ports such as Jebel Ali—impacting flows into rest of the Middle East, Africa and Europe
Disruption to supply chains could affect PC, smartphone, and device availability regionally and beyond.
Meanwhile, industries linked to discretionary wealth—such as luxury real estate and tourism—may experience spending pauses, indirectly affecting associated enterprise IT investments in the region.
Outside of the Middle East, fragile consumer spending is unlikely to withstand a major or prolonged period of price increases, with rising energy costs potentially causing consumers to delay purchases of PCs, tablets, smartphones and other devices. With prices for these device categories already rising due to memory price shortages, this will only lead to more consumers choosing to wait before replacing their existing devices.
IMPACT ON IT SPENDING & INVESTMENT
AI Investment: Acceleration or Pause?
Rising input costs and macro uncertainty may cause some enterprises to reassess AI production deployments, especially if the conflict lasts for a longer period. As with consumer confidence, business sentiment remains extremely fragile and uncertain. Any signs of areal slowdown in economic activity may translate into some projects being delayed or downscaled in the near term.
On the other hand, where proven ROI cases and measurable outcomes are delivering rapid efficiency savings, AI may in some cases be deployed more aggressively to mitigate macroeconomic headwinds. Our surveys have shown a consistent trend of more organizations indicating their intention to utilize IT deployments as a tactical response to macroeconomic pressure. This represents a change from previous economic downturns, when IT spending cuts were often a primary contingency response to the first signs of a softening external environment.
Overall, a relatively short conflict is unlikely to severely derail AI and IT spending plans for most organizations. Underlying demand is strong and has proven resilient in the face of external shocks such as tariffs and other geopolitical conflict in recent years. AI remains highly prioritized, with a strong focus on deploying at scale for greater business impact in 2026.
The greater risk would be from a longer conflict, which could place more pressure on available capital and resources due to inflationary pressures and supply chain disruption. AI spending would likely be more resilient than other types of investment, but not immune to a worst-case scenario. .
Two opposing forces are at play:
Constraining Forces
- Higher infrastructure costs
- Tighter capital environments
- Memory scarcity
Accelerating Forces
- Increased cybersecurity demand
- Defense-related AI and analytics investment
- Sovereign AI initiatives in the Gulf
Net impact will vary by geography:
- Gulf states: continued state-backed AI investment likely.
- Europe and Asia: greater macro sensitivity.
- Global enterprises: tighter ROI scrutiny.
Three-Scenario Outlook for IT Spending
IDC’s forecasts for IT spending are updated every month to reflect the latest macroeconomic and industry data. This monthly forecast includes scenarios which reflect historical correlations between technology markets and their sensitivity to changes in economic conditions.
Our most recent baseline forecasts were published on February 27 and already reflect assumptions relating to some volatility in oil prices and supply chain factors. We’ve created two new scenarios to assess the likely impact of a regional conflict which lasts for up to 3 months (scenario 1) or most of 2026 (scenario 2).
While there will be some short-term disruption from a much shorter conflict which is resolved within weeks, we don’t currently plan to revise our baseline February 27 Black Book forecast. A shorter conflict will result in a much faster rebound and resumption of ongoing investments and projects over the course of the year. This is a highly fluid environment, and our baseline assumptions may change in the coming weeks, before the next scheduled forecast release on March 30.
Of the two alternative scenarios we have created, the more likely outcome is one in which the conflict is resolved within 3 months or less. This lingering conflict (months, not weeks) would have a more measurable impact on IT spending, resulting in around a 1.0 percentage point reduction in annual growth. Most of this impact would be concentrated in devices and discretionary project spending. In the absence of other external factors, we don’t expect service providers to significantly pull back their AI investment plans.
Compared to previous military conflicts such as the Iraq war in the early 2000s, the IT industry is now extremely different, having undergone a period of radical transformation over the past two decades. A much larger share of enterprise IT spending is now opex and subscription-based, while a larger share of infrastructure investment is now concentrated in the service provider segment.
The primary risk to enterprise IT spending is related to macroeconomic factors, in particular a period of much higher oil prices which would affect business and consumer spending in addition to central bank decisions around interest rate policy. In the second scenario, where a conflict lasts for more than 3 months, this would result in more postponements of IT projects and device upgrades. The impact on IT spending in this scenario would be greater than 1.0 percentage point.
In the Middle East/Africa region, the impact is more complicated, and likely to be more fluid in the context of ongoing political developments which are difficult to predict. Strategic, regional investment in AI is likely to continue, however, with most of the downside impact focused on business and consumer spending delays.
Our current baseline forecast of 5% growth in MEA IT spending this year would likely fall into a range of 3-4% in the first scenario, where the conflict lasts for several months. The smartphone market was already expected to decline this year, partly due to memory price increases, and things may get worse before they get better. Smartphones make up a larger share of IT spending in MEA than other regions, resulting in lower IT spending growth overall expected in 2026.
However, even in a worst-case scenario where the conflict lasts for longer than 3 months, underlying demand for cloud and AI deployment in the region is likely to remain strong and would recover quickly.
Baseline: Contained Conflict (Weeks)
- Temporary oil spike.
- Modest pause in regional projects.
- Minimal revision to global IT growth outlook.
Scenario 1: Prolonged Regional Instability (Less than 3 Months)
- Oil sustained at $85–$95.
- Inflationary pressure dampens global IT growth by 0.5–1.0 percentage points.
- Accelerated sovereign cloud buildout.
- Slower consumer device recovery.
Scenario 2: Escalation and Energy Shock (6-9 months)
- Oil above $100.
- Delayed interest rate normalization.
- Significant consumer contraction.
- Enterprise reprioritization toward resiliency, cybersecurity, and critical infrastructure.
- More pronounced impact on IT spending, especially in the MEA region.
IDC’s Strategic View
The war in the Middle East is not simply a regional geopolitical event, it is a structural test of the digital economy’s energy dependence, infrastructure resilience, and supply chain architecture.
Key themes IDC will monitor:
- Energy price persistence and inflation trajectory.
- Cloud infrastructure risk reassessment and redundancy investments.
- Memory market tightening linked to defense demand.
- Government fiscal trade-offs between defense and digital transformation.
- Consumer sentiment shifts and device demand elasticity.
While the Middle East faces immediate exposure, the global IT industry will feel second-order effects through energy costs, semiconductor supply, and capital allocation decisions.
In the near term, caution and scenario planning will dominate enterprise decision-making. In the medium term, this conflict may accelerate structural investments in sovereign infrastructure, cybersecurity, and multi-region cloud resiliency.
IDC will continue to refine its spending outlook as economic assumptions evolve. IT Spending forecasts are published on the last working day of every month, reflecting the latest market data and developments. We’ll monitor this data closely in the days and weeks ahead.
