--- description: "The consequences are unknowable in terms of how this ripples through this highly interconnected energy and information grid.” title: The Iran War Could Hit AI—and Then the Economy image: https://static.time.com/v3/assets/bltea6093859af6183b/bltde8d6c3516f07d59/69bd5c06ce06263061f66d7d/GettyImages-2264053325.jpg?branch=production&width=2400&quality=75&auto=webp&crop=16:9 ---  # How the Iran War Could Hit AI—and Then the Economy  by [Andrew R. Chow](/author/andrew-r-chow/)  ## Andrew R. Chow Update your preferences in [Account Settings](/account/preferences/) Close Correspondent Mar 20, 2026 3:18 PM CUT  Qatar's Ras Laffan Industrial City, the world’s largest liquefied natural gas facility, was attacked during the Iran War Photo this week. Qatar's Ras Laffan Industrial City, the world’s largest liquefied natural gas facility, was attacked during the Iran War Photo this week.Stringer/Getty Images  by [Andrew R. Chow](/author/andrew-r-chow/)  ## Andrew R. Chow Update your preferences in [Account Settings](/account/preferences/) Close Correspondent Mar 20, 2026 3:18 PM CUT Welcome back to In the Loop, _TIME’s_ new twice-weekly newsletter about AI. We're publishing these editions both as stories on Time.com and as emails. If you're reading this in your browser, why not subscribe to have the next one delivered straight to your inbox? [**Subscribe to** _In the Loop_](https://timeintheloop.beehiiv.com/subscribe "undefined") ## What to Know: Iran War threatens the AI industry As the Iran War drags toward its fourth week, concerns are growing about its potential impact on the AI sector—which could then extend outward into the larger economy. The AI industry, and specifically its data center investments, are essentially holding up the U.S. economy, accounting for ‌39% of U.S. GDP growth in the first three quarters of last year, [according](https://www.stlouisfed.org/on-the-economy/2026/jan/tracking-ai-contribution-gdp-growth "undefined") to the Federal Reserve Bank of St. Louis. The Iran War could threaten that growth in several ways. Paul Kedrosky, an investor and research fellow at MIT’s Institute for the Digital Economy, tells TIME that the onset of the war has made him “vastly more” concerned about the systemic economic risks related to AI, because “the consequences are unknowable in terms of how this ripples through this highly interconnected energy and information grid.” **Energy—** Many AI data centers, which train AI systems like ChatGPT and process their queries, are powered by natural gas. While Iran’s first big resource strain has been on oil, gas facilities have been [targeted](https://www.nytimes.com/2026/03/19/business/energy-environment/iran-oil-natural-gas-attacks.html "undefined") in the Gulf. Analysts say they could take months to repair, leading to higher gas prices worldwide. European natural gas prices surged by as much as 30 percent on Thursday. However, most data centers still reside in the U.S., which is more insulated from these direct shocks, because the country produces and exports its own natural gas. Kedrosky says that most data centers in the U.S. may not see immediate cost increases. “But there could be this ripple effect where workloads get pushed to the U.S., but you can't add new supply because the backlog queue is already immense, and so there’s a potential for this whole thing to seize up,” he says. Another risk is the global helium supply, as a third of it comes from Qatar. Helium is [essential](https://www.cnbc.com/2026/03/19/the-iran-war-is-threatening-supply-helium-what-it-means-for-markets.html "undefined") in the manufacturing of the chips that power AI. **Data center risks—** Data centers in the Middle East are also under direct attack: they have become the target of strategic missile strikes from both sides of the conflict. Last year, the U.S. and Arab countries like the U.A.E. touted big plans for massive data center buildouts in the region. But a prolonged war in the region could [complicate](https://thehill.com/business/5783723-us-war-iran-middle-east-ai/ "undefined") those buildouts, making them too risky or expensive. Fengqi You, a Cornell professor of energy systems engineering, visited the U.A.E. a few months ago and says that even before the war, there were challenges to building data centers in the Middle East, most notably around water consumption. Now, the main advantage that the Middle East had—cheap, reliable access to seemingly unlimited energy—is no longer certain. “In the near-term, a lot of companies will probably re-evaluate,” You says. **Private credit and inflation—**The Iran War is also weighing on the private credit industry, which has financed much of the data center buildout—and recently [wobbled](https://www.reuters.com/business/finance/private-credit-strains-ripple-through-wall-street-investors-grow-wary-2026-03-16/ "undefined") under the strain of the “SaaS-pocalypse,” as investors [worried](https://www.thestreet.com/technology/saas-pocalypse-stresses-3-trillion-private-credit-market "undefined") that AI would threaten the financial sustainability of software businesses. Some private credit firms even [imposed gates](https://www.bloomberg.com/news/features/2026-03-08/blackrock-blackstone-confront-withdrawals-as-private-credit-redemptions-surge "undefined") to stop investors from leaving. Kedrosky says that as these firms scramble to pay out investors fleeing to safety, “that reduces the amount of capital available to invest in AI capex. So there's the long chain of events.” Finally, there’s the macroeconomic risk that the massive increase in oil prices could lead to a general rise in inflation. And if central banks decide to raise interest rates to combat that trend, companies might decide to tighten their belts, forgoing expensive investments in large-scale projects like AI. As I wrote in [my book Cryptomania](https://www.simonandschuster.com/books/Cryptomania/Andrew-R-Chow/9781668038178 "undefined"), similar dynamics crushed the crypto industry in 2022 after Russia invaded Ukraine. Earlier this week, the author Richard Bookstaber [wrote](https://www.nytimes.com/2026/03/16/opinion/financial-crisis-private-credit-ai-iran-taiwan.html "undefined") in an op-ed in the _New York Times_ that the stock market’s concentration in AI stocks is “unprecedented — and dangerous, because it means a shock to any one of these companies can ripple across the entire market rather than be absorbed by it.” Kedrosky agrees with the op-ed. “He makes the right points with respect to the potential for new kinds of systemic risk, not just because of private credit, but because of the interconnected nature of what's happening,” he says. “But like all such pieces, it'll be ignored until it turns out to be prescient.” **Industry strength—** But these risks could be overstated, especially if the war wraps up quickly. AI companies are thriving right now, with Anthropic [doubling](https://www.bloomberg.com/news/articles/2026-03-03/anthropic-nears-20-billion-revenue-run-rate-amid-pentagon-feud "undefined") its projected revenue run rate from late last year. While “risky” assets are usually the most impacted by turmoil, it’s possible that the AI sector is moving towards “essential” territory and may not see much of a scale-back in investment. _Bloomberg_ [reported](https://www.bloomberg.com/news/articles/2026-03-19/traders-overwhelmed-by-iran-news-are-turning-to-ai-for-help "undefined") that the war has caused some traders to use AI even more in order to make sense of the war’s impact on markets. “Look how powerful these AI models are and how fast they are being adopted. The demand is clearly growing, it’s not stopping because of this conflict,” You says. You says that while the war’s impact on energy prices may slow data center growth in the short term, it could also push companies toward clean energy sources, like solar and wind, and towards more efficient cooling methods. “My view is that companies are likely to be more selective,” he says, “but not necessarily less committed.” [**Subscribe to** _In the Loop_](https://timeintheloop.beehiiv.com/subscribe "undefined") ## Who to Know: Benjamin Netanyahu in AI form (or not) For the last few years, misinformation experts have worried that the rise of hyperrealistic AI deepfakes would lead to fake videos being accepted as truth. This is the basis of the 2025 HBO movie [_Mountainhead_](https://time.com/7289667/mountainhead-inspiration-elon-musk-mark-zuckerberg-peter-thiel/ "undefined"), in which synthetic videos of unrest and violence spread online, leading to actual unrest and violence. But currently, the much bigger problem now may be the inverse: AI deepfakes are now so realistic that people don’t believe _real_ videos are actually real. Case in point: the death rumors swirling around Israeli Prime Minister Bibi Netanyahu. Netanyahu recently posted two videos of himself, including one in a coffee shop. Viewers online immediately claimed they were fake, and that he had six fingers in one frame. Even Grok—Elon Musk’s AI chatbot—wrote on X that one of the videos was fake. That fact-checkers have [debunked](https://www.snopes.com/fact-check/netanyahu-6-fingers-ai/ "undefined") those claims barely matters: most people on the internet don’t routinely check websites like Snopes to verify every video on social media. Meanwhile, the Iranian government has [circulated synthetic images](https://www.nytimes.com/2026/03/17/technology/netanyahu-ai-video-iran-israel.html "undefined") of Iranian victims meant to generate sympathy. All of this amounts to a frightening ecosystem in which AI has exacerbated a trust crisis online, and people are much less likely to believe videos that threaten their preexisting beliefs. And cybersecurity experts still worry that AI misinformation campaigns are gaining steam. “Iran and other adversaries are running sophisticated influence operations powered by the same commercial AI tools the rest of the world uses every day,” says Aaron Estes, vice president of the cybersecurity company Binary Defense. “These campaigns can trigger market sell-offs, halt shipping and logistics operations, fuel public panic, and accelerate extremism. AI-driven influence operations demand an entirely new kind of security response, and our industry is only beginning to define what that looks like.” ## AI In Action A few months ago, Walmart announced it was bringing Instant Checkout to ChatGPT, allowing shoppers to order items directly inside the chatbot. However, this week, the company [announced](https://www.techbuzz.ai/articles/walmart-dumps-openai-checkout-plugs-sparky-into-chatgpt "undefined") a reversal in operations: That it would embed its own chatbot, Sparky, into ChatGPT and Gemini as a plug-in, giving Walmart, not OpenAI, control of customer data. ## What We're Reading [“President Donald J. Trump Unveils National AI Legislative Framework,” ](https://www.whitehouse.gov/articles/2026/03/president-donald-j-trump-unveils-national-ai-legislative-framework/ "undefined")The White House On Friday morning, the White House released a framework for AI legislation, in the hopes that Congress will pass a unified federal policy for AI that companies will abide by instead of a “patchwork” of state laws. The document’s main pillars address two issues that have [energized anti-AI movements](https://time.com/7377579/ai-data-centers-people-movement-cover/ "undefined") on the right: child safety around chatbots, and protection from data center-induced energy cost increases. ```json [{"@context":"https://schema.org","@type":"NewsArticle","@id":"https://time.com/article/2026/03/20/iran-war-AI-economy/","mainEntityOfPage":{"@type":"WebPage","@id":"https://time.com/article/2026/03/20/iran-war-AI-economy/"},"headline":"How the Iran War Could Hit AI—and Then the Economy","datePublished":"2026-03-20T15:18:00.192Z","dateModified":"2026-05-13T06:52:26.501Z","description":"\"The consequences are unknowable in terms of how this ripples through this highly interconnected energy and information grid.”","url":"https://time.com/article/2026/03/20/iran-war-AI-economy/","keywords":[],"thumbnailUrl":"https://static.time.com/v3/assets/bltea6093859af6183b/bltde8d6c3516f07d59/69bd5c06ce06263061f66d7d/GettyImages-2264053325.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","author":[{"@type":"Person","name":"Andrew R. Chow","jobTitle":"Correspondent","url":"https://time.com/author/andrew-r-chow/"}],"articleSection":"","image":[{"@type":"ImageObject","url":"https://static.time.com/v3/assets/bltea6093859af6183b/bltde8d6c3516f07d59/69bd5c06ce06263061f66d7d/GettyImages-2264053325.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","width":1200,"height":675,"headline":"GettyImages-2264053325.jpg","caption":"","creditText":"Stringer/Getty Images","representativeOfPage":true}],"publisher":{"@type":"Organization","name":"Time","url":"https://time.com/","logo":{"@type":"ImageObject","url":"https://time.com/images/logo.png","width":528,"height":156},"foundingDate":"March 3, 1923","sameAs":["https://www.facebook.com/time","https://www.instagram.com/time/?hl=en","https://twitter.com/time","https://www.pinterest.com/timemagazine"]}},{"@context":"https://schema.org","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"item":{"@id":"https://time.com/article/2026/03/20/iran-war-AI-economy/","name":"How the Iran War Could Hit AI—and Then the Economy"}}]}] ```