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And now for the main event…

It’s not only gas prices that are spiking after Iran effectively closed the Strait of Hormuz, throttling one-fifth of the world’s oil supply. As it turns out, the 21-mile-wide channel is also a chokepoint for roughly a third of the world’s helium and about half of the global seaborne trade in sulfur—both essential components in semiconductor manufacturing. “The overarching story is that the world’s most important chip producers depend on energy and chemical supplies that move through some of the most geopolitically volatile waterways on Earth, and the Trump administration doesn’t seem to have a contingency plan for it,” said Sam Winter-Levy, a fellow at the Carnegie Endowment for International Peace.

The ripple effects could seriously set back the global A.I. race, which has been consuming trillions of dollars in energy and raw materials at an unprecedented clip. In a best-case scenario, helium production could be disrupted for three to four months, according to industry expert Phil Kornbluth—and the impact could easily stretch longer. Even after the war is over and QatarEnergy restarts its shuttered plants, Kornbluth told me, it would take “around four to five weeks before helium production resumes [and then] several weeks to a month or more to reach markets in Asia and Europe.” Meanwhile, spot prices for sulfur, used to make the sulfuric acid necessary for cleaning chips, have skyrocketed.

There are also the reverberations of the oil shock itself. “Overall, equities face rising correction risk; valuations are stretched, macro conditions are deteriorating at the margin, and cracks are appearing,” Goldman chief global equity strategist Peter Oppenheimer wrote in a research note this week. Oppenheimer thinks the “weakness should be temporary,” but Goldman economists still raised their 12-month recession odds to 25 percent. At a moment when the entire A.I. industry is cruising on investor euphoria, a downturn would likely hit the highest-flying stocks first—and force even the biggest V.C. firms to rethink their appetite for risk.

Many analysts assume the war in Iran will be short-lived, especially as the White House belatedly comes to terms with the entirely foreseeable economic impact of conflict in the Persian Gulf. There’s no better way to lose a midterm than to tell Americans not to worry about rising gas prices. But if the crisis continues to escalate, the A.I. industry may be forced to countenance its own black swan event.

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Taiwan and South Korea, home to chip fabs TSMC and SK Hynix, respectively, import the vast majority of their crude oil from the Middle East. “The A.I. boom had already driven chip prices to historic highs and created shortages before the strait was closed,” Winter-Levy said. “A sustained disruption to Korean and Taiwanese energy supplies would ripple through the entire global A.I. ecosystem.” (A TSMC spokesperson told me that the company does “not anticipate any significant impact at this time, and we will continue monitoring the situation closely.”)

Meanwhile, in the U.S., data centers had already been struggling to get access to enough electrical capacity. The closure of the strait, Winter-Levy theorized, will likely increase the global costs of data center operation, while the general economic uncertainty stemming from the war could slow down both data center and chip factory construction. Dr. Nada Sanders, a professor of supply chain management at Northeastern University, agreed. “We’re not going to see data centers going dark overnight, but I think we’re looking at prices that are going to creep—a little bit more of a slow boil,” she said. “It’s an energy system stress story.” Furthermore, even if the conflict were to end tomorrow, she contended, it would take months for the A.I. supply chain to normalize.

Of course, supply shocks move through economies at variable speeds. Helium prices, for instance, are typically locked in with long-term contracts, which have yet to rise (though Kornbluth expects that to change soon). Belden, which sells the fiber cables that enable data center network connectivity, has yet to see a material impact from the war, according to revenue management officer Brian Kennedy. A contact at Chatsworth, which builds storage for data centers, also said there’d been no impact on their business yet. And a source at an electricity company told me that while data center operators are likely to see higher prices for both diesel and natural gas, most hedge energy risks with fixed-price contracts.

Still, every month matters in an A.I. race, where the competition is moving at exponential rates. Both data center and semiconductor factory construction require hyperscale investments and relatively lengthy time horizons; the construction of TSMC’s second fabrication facility in Arizona, for instance, was completed in 2025, but “volume production” won’t begin until 2028. “Sustained geopolitical volatility complicates those decisions and could slow the build-out of the chip supply that A.I. companies are counting on,” Winter-Levy told me. “In other words, the A.I. supply chain turns out to have some of the same geographic vulnerabilities as the energy supply chain.” The difference, he added, is that “oil has decades of conflict-exposure planning baked into the infrastructure. For A.I., that planning doesn’t exist yet.”

The interplay between broader macro conditions and the specific market dynamics of the hyperscaler hype cycle is difficult to suss out. One way to think about it, said D.A. Davidson analyst Gil Luria, is that if the Iran conflict sparks a “very broad recession,” the A.I. industry will not be able to “escape” it—people would buy less from Amazon; companies would spend less on advertising with Google and Meta, depriving them of cashflow; etcetera. “That’s the mechanism by which this could impact [the industry],” Luria explained. “But it’s way too early to think that’s going to happen, because if this is just a temporary spike in oil prices and the Iran situation gets resolved one way or another in the next few months, we may not get into a deep recession that would impact these companies.”

I asked Luria what it might take for the hyperscalers to scale back their A.I. infrastructure capex plans, estimated at roughly $700 billion for 2026. “These companies have very good businesses,” he said. “We’re speculating way down the line. We’d have to be in a pretty bad state for these companies to change course.”

Of course, the entire A.I. economy—propelled by raucous investor excitement and a narrative of almost violent urgency—was unproven even before the war started. Now that the uncertainty has compounded, it’s not hard to imagine how dramatically things could unwind if a prolonged conflict and steadily rising prices erode investors’ risk tolerance. And if the money faucets get turned down, the industry’s ultra-optimistic projections (Nvidia chief Jensen Huang just forecast $1 trillion in chip revenue through 2027) would almost certainly need to be revised. “If there’s less demand for data centers, there’s less demand for chips,” Luria conceded. “And that’ll ripple all the way through.”

While the full ramifications are impossible to predict, what’s clear is that the U.S.–Israel war on Iran has transformed an already unstable market sector into something messier—a “hornet’s nest,” as Sanders put it. Worse, said Winter-Levy, it all screams of “strategic incoherence” and was, obviously, entirely avoidable. “Washington is spending tens of billions of dollars through the CHIPS Act to onshore semiconductor fabrication from Taiwan precisely because everyone acknowledges Taiwan sits in a geopolitical hotspot. But the Trump administration has decided that the Gulf states should be its closest partners in the A.I. data center build-out.” Who could have predicted that launching a war next door might put all that at risk?

That’s all for today. I’ll see you on Thursday.

Ian

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