The Iran War Will Make GCC Climate Tech More Relevant
The Iran war is shifting the Gulf's diversification calculus toward climate tech.
By Dawud Al Ansari
The war has already reshaped the Gulf, not only in security but also in economic strategy. One might assume that climate tech will become less relevant in the post-war Gulf. After all, crisis management overrides longer-term concerns: hard security, reconstruction, and economic stabilization are likely to dominate the policy agenda. Moreover, Foreign Direct Investment (FDI) flows will likely be curtailed, leaving less financing for ambitious sectoral bets. And the Gulf Cooperation Council (GCC) states, drawn into a conflict they did not seek but that many of their neighbors openly celebrated, may become more inward-looking and less inclined to prioritize climate security.
Yet the opposite may well prove true. The war has triggered a chain of external pressures that make resilience and the internalization of financing more imperative. At the same time, pre-war domestic imperatives, including the critical need to broaden national sectoral bases, persist. In this constellation, climate tech may emerge as even more central than before.
Structural Necessity
GCC countries, as rising middle powers in an increasingly polycentric global order, pursue well-documented geopolitical ambitions: regional hegemony, strategic hedging among major powers, and the perpetuation of a distinctive social, political, and economic model. Yet these ambitions are largely contingent on, and ultimately subordinate to, underlying material imperatives, principally the need to sustain growth and, with it, domestic stability.
Economic and sectoral expansion is not merely a policy preference but a structural necessity. The Gulf is distinctive among high-income regions in that its citizen populations remain exceptionally young, creating a structural imperative to absorb large (and growing) cohorts of nationals each year into productive employment. About half of the GCC citizen population is under age 25. The security apparatus and conventional energy have historically absorbed most of the GCC labor supply and served as conduits for distributing rent throughout the economy but are now saturated.
Each GCC economy therefore faces the fundamental challenge of labor absorption, albeit at different stages. In some countries, depending on their degree of hydrocarbon dependence and demographic make-up, spiking unemployment has become an existential concern. In others, the discourse remains focused on embedding nationals into meaningful parts of the economy. But the underlying challenge is shared, and expanding the productive base through new sectors is a structural precondition of social stability.
Climate tech’s occupational profile, centered on a mix of engineering and technical capabilities, maps well onto the graduate labor force GCC universities are producing.
Choosing which sectors to expand into is not, however, neutral. Different sectoral pathways imply different forms of dependency, resilience, and vulnerability, shaping not only economic outcomes but also the broader meaning of security. The war is reshaping the thinking of GCC leaders at this juncture.
Stability as a Business Model
The dominant model for financing the new GCC economy has rested on a clear premise. Sovereign wealth funds would play a supporting role, but the primary driver of new sector development such as artificial intelligence, data infrastructure, logistics, and advanced manufacturing, was to be FDI. Saudi Arabia alone targeted $100 billion annually by 2030. For this, GCC countries have offered investors a compelling proposition: strategic geography, lowest-cost energy, cheap expatriate labor, low-tax regimes, and, at face value, streamlined decision-making. But principally, the prospect of absolute stability sustains the credibility of the entire model. Establishing this geo-economization was arguably the central objective of the 2023 Saudi-Iran rapprochement in the first place.
Iran’s predominant “low-maintenance, high-gain” style of warfare has, however, targeted this vital condition directly. Sustained drone and missile harassment have been calibrated not to trigger overwhelming retaliation, but to inflict maximum damage on the GCC’s image as an island of predictability.
Iran’s strikes on data centers and regional technology headquarters are therefore not merely symbolic as they hit GCC countries precisely where the new economy was meant to take root. Investment decisions in these sectors are sensitive to perceived risk and long-term predictability; even limited disruptions can disproportionately deter investors. While an apocalyptic, depopulated Dubai remains a fantasy, European heavy industry seeking to relocate or US technology companies considering new data center locations will have less reason to favor the Gulf. While most effects on the GCC may prove temporary, some impairment of the FDI model is likely to endure and will require refined sectoral planning.
Internalizing the Bet
This rupture, however, may set further dynamics in motion. First, declining FDI cannot halt economic expansion in the GCC. Instead, the source of capital will shift, and where foreign investors prove absent or unreliable, domestic funding will need to compensate — and GCC sovereign wealth funds have the institutional means to do so. Until now, their predominant role has been complementary, co-investing alongside foreign capital rather than leading. Their role in domestic economic development is, however, likely to become substantially more active.
Precedents exist: Saudi Arabia’s Public Investment Fund has loaded renewable energy assets onto its balance sheet, despite their typically lower rates of return. Similarly, Mubadala in Abu Dhabi operates with a mandate that explicitly integrates development objectives alongside financial returns. The war is likely to accelerate this shift, expanding the range of assets these funds support domestically and lowering the threshold for investments justified primarily by resilience, especially where FDI has become difficult to attract.
Second, industrial planning has traditionally been a decisive vehicle for GCC economic development, and the question of which sectors to prioritize will likely need to be reopened once the war ends. In recent years, the AI and data center sector has received the most attention across GCC economies, but it is also the most structurally exposed to the new configuration. The sector is overwhelmingly led by foreign firms choosing between competing locations, not by national champions; and its demand logic is aggregated and regional, meaning that once facilities are built elsewhere, the opportunity does not return. Its physical infrastructure remains vulnerable, and it is labor-light, offering little on the employment dimension where domestic pressure is most acute.
Under these conditions, expected returns alone no longer determine sectoral viability. What increasingly matters is whether a sector can be financed autonomously, operate without heavy dependence on external actors, and contribute directly to systemic resilience. Climate tech satisfies all of these criteria, and does so in ways that connect the domestic, the strategic, and the international dimensions of GCC ambition.
Three Imperatives, One Sector
Climate tech, understood here as the engineering, infrastructure, and systems-level work of adapting to the accelerating impacts of climate change, has so far received less attention in GCC economic planning than, for instance, AI and logistics. Yet the war will likely change this over the medium term for reasons that are structural rather than incidental. What distinguishes climate tech, alongside a few other sectors, such as desalination infrastructure and defense industries, is that it simultaneously addresses three distinct imperatives the war has either created or significantly amplified. The first is domestic economic development.
While climate tech is capital-intensive, it does generate demand for a broad range of skilled labor, and it can be financed through sovereign wealth rather than FDI. Climate tech’s occupational profile, centered on a mix of engineering and technical capabilities, maps well onto the graduate labor force GCC universities are producing and offers technically demanding, nationally meaningful employment. The GCC’s own exposure to extreme heat, water scarcity, coastal vulnerability, and stress on ageing urban infrastructure generate demand for precisely this kind of green urban development, from next-generation district cooling systems to flood-resilient coastal development and large-scale water reuse infrastructure.
The second is internal strategic resilience. Strikes on infrastructure and data centers have demonstrated that security vulnerabilities extend well beyond the military domain. Security will likely be understood more expansively, increasingly encompassing the resilience of critical systems against environmental as well as military threats. Driven by the domestic demand outlined above, this shift is not an abstract concern but a concrete policy agenda.
The third is external projection and regional positioning. Shifting geopolitical dynamics will ultimately require greater regional economic engagement, even as post-war Gulf states turn inward in the short term. Sovereign wealth can launch new sectors, but sustaining them requires private capital, which in turn requires exportable demand beyond the Gulf’s small domestic markets. Incoherent US Middle East policy and the likely deterioration of Iran’s post-war economic position will together open a regional vacuum that only the GCC can plausibly fill in influence, development leadership, and institutional capacity.
GCC actors such as Masdar and ACWA Power have already established the capacity to deploy complex energy and infrastructure projects across the Global South. The capabilities underpinning this track record are transferable to climate adaptation: entities that have successfully financed and delivered utility-scale solar in Morocco or Uzbekistan carry the same institutional DNA needed to deliver coastal resilience infrastructure in Bangladesh or Indonesia, whether through existing national champions or new ones.
The Quieter Shift
The consequences of war are seldom unidirectional. Climate tech can emerge as a major sector in the Gulf precisely because the imperatives are mutually reinforcing: domestic investment builds capability, capability enables external deployment, and external deployment reinforces the strategic positioning underpinning GCC hegemonic ambitions in the post-war regional order.
The more consequential shifts may well occur in the quieter domain of sectoral reorientation, and climate tech is likely to be near its center. Early signals will be visible in sovereign wealth fund allocation decisions and in whether GCC industrial policies treat adaptation infrastructure as a strategic sector rather than an environmental afterthought.
Dr. Dawud Al Ansari is a Gulf Committee member of the Rihla Initiative for Green Economic Growth. He is a leading expert in geopolitics, energy, and development, specializing in global issues and GCC-related questions. As President of the Muscat-based Shaheen Institute for Strategy & Development, he leads research programs on foresight, economics, and strategic affairs.
Section: (rihla-initiative) Photo: Aleksey Kuprikov
reover, Foreign Direct Investment (FDI) flows will likely be curtailed, leaving less financing for ambitious sectoral bets. And the Gulf Cooperation Council (GCC) states, drawn into a conflict they did not seek but that many of their neighbors openly celebrated, may become more inward-looking and less inclined to prioritize climate security.
Yet the opposite may well prove true. The war has triggered a chain of external pressures that make resilience and the internalization of financing more imperative. At the same time, pre-war domestic imperatives, including the critical need to broaden national sectoral bases, persist. In this constellation, climate tech may emerge as even more central than before.
Structural Necessity
GCC countries, as rising middle powers in an increasingly polycentric global order, pursue well-documented geopolitical ambitions: regional hegemony, strategic hedging among major powers, and the perpetuation of a distinctive social, political, and economic model. Yet these ambitions are largely contingent on, and ultimately subordinate to, underlying material imperatives, principally the need to sustain growth and, with it, domestic stability.
Economic and sectoral expansion is not merely a policy preference but a structural necessity. The Gulf is distinctive among high-income regions in that its citizen populations remain exceptionally young, creating a structural imperative to absorb large (and growing) cohorts of nationals each year into productive employment. About half of the GCC citizen population is under age 25. The security apparatus and conventional energy have historically absorbed most of the GCC labor supply and served as conduits for distributing rent throughout the economy but are now saturated.
Each GCC economy therefore faces the fundamental challenge of labor absorption, albeit at different stages. In some countries, depending on their degree of hydrocarbon dependence and demographic make-up, spiking unemployment has become an existential concern. In others, the discourse remains focused on embedding nationals into meaningful parts of the economy. But the underlying challenge is shared, and expanding the productive base through new sectors is a structural precondition of social stability.
Climate tech’s occupational profile, centered on a mix of engineering and technical capabilities, maps well onto the graduate labor force GCC universities are producing.
Choosing which sectors to expand into is not, however, neutral. Different sectoral pathways imply different forms of dependency, resilience, and vulnerability, shaping not only economic outcomes but also the broader meaning of security. The war is reshaping the thinking of GCC leaders at this juncture.
Stability as a Business Model
The dominant model for financing the new GCC economy has rested on a clear premise. Sovereign wealth funds would play a supporting role, but the primary driver of new sector development such as artificial intelligence, data infrastructure, logistics, and advanced manufacturing, was to be FDI. Saudi Arabia alone targeted $100 billion annually by 2030. For this, GCC countries have offered investors a compelling proposition: strategic geography, lowest-cost energy, cheap expatriate labor, low-tax regimes, and, at face value, streamlined decision-making. But principally, the prospect of absolute stability sustains the credibility of the entire model. Establishing this geo-economization was arguably the central objective of the 2023 Saudi-Iran rapprochement in the first place.
Iran’s predominant “low-maintenance, high-gain” style of warfare has, however, targeted this vital condition directly. Sustained drone and missile harassment have been calibrated not to trigger overwhelming retaliation, but to inflict maximum damage on the GCC’s image as an island of predictability.
Iran’s strikes on data centers and regional technology headquarters are therefore not merely symbolic as they hit GCC countries precisely where the new economy was meant to take root. Investment decisions in these sectors are sensitive to perceived risk and long-term predictability; even limited disruptions can disproportionately deter investors. While an apocalyptic, depopulated Dubai remains a fantasy, European heavy industry seeking to relocate or US technology companies considering new data center locations will have less reason to favor the Gulf. While most effects on the GCC may prove temporary, some impairment of the FDI model is likely to endure and will require refined sectoral planning.
Internalizing the Bet
This rupture, however, may set further dynamics in motion. First, declining FDI cannot halt economic expansion in the GCC. Instead, the source of capital will shift, and where foreign investors prove absent or unreliable, domestic funding will need to compensate — and GCC sovereign wealth funds have the institutional means to do so. Until now, their predominant role has been complementary, co-investing alongside foreign capital rather than leading. Their role in domestic economic development is, however, likely to become substantially more active.
Precedents exist: Saudi Arabia’s Public Investment Fund has loaded renewable energy assets onto its balance sheet, despite their typically lower rates of return. Similarly, Mubadala in Abu Dhabi operates with a mandate that explicitly integrates development objectives alongside financial returns. The war is likely to accelerate this shift, expanding the range of assets these funds support domestically and lowering the threshold for investments justified primarily by resilience, especially where FDI has become difficult to attract.
Second, industrial planning has traditionally been a decisive vehicle for GCC economic development, and the question of which sectors to prioritize will likely need to be reopened once the war ends. In recent years, the AI and data center sector has received the most attention across GCC economies, but it is also the most structurally exposed to the new configuration. The sector is overwhelmingly led by foreign firms choosing between competing locations, not by national champions; and its demand logic is aggregated and regional, meaning that once facilities are built elsewhere, the opportunity does not return. Its physical infrastructure remains vulnerable, and it is labor-light, offering little on the employment dimension where domestic pressure is most acute.
Under these conditions, expected returns alone no longer determine sectoral viability. What increasingly matters is whether a sector can be financed autonomously, operate without heavy dependence on external actors, and contribute directly to systemic resilience. Climate tech satisfies all of these criteria, and does so in ways that connect the domestic, the strategic, and the international dimensions of GCC ambition.
Three Imperatives, One Sector
Climate tech, understood here as the engineering, infrastructure, and systems-level work of adapting to the accelerating impacts of climate change, has so far received less attention in GCC economic planning than, for instance, AI and logistics. Yet the war will likely change this over the medium term for reasons that are structural rather than incidental. What distinguishes climate tech, alongside a few other sectors, such as desalination infrastructure and defense industries, is that it simultaneously addresses three distinct imperatives the war has either created or significantly amplified. The first is domestic economic development.
While climate tech is capital-intensive, it does generate demand for a broad range of skilled labor, and it can be financed through sovereign wealth rather than FDI. Climate tech’s occupational profile, centered on a mix of engineering and technical capabilities, maps well onto the graduate labor force GCC universities are producing and offers technically demanding, nationally meaningful employment. The GCC’s own exposure to extreme heat, water scarcity, coastal vulnerability, and stress on ageing urban infrastructure generate demand for precisely this kind of green urban development, from next-generation district cooling systems to flood-resilient coastal development and large-scale water reuse infrastructure.
The second is internal strategic resilience. Strikes on infrastructure and data centers have demonstrated that security vulnerabilities extend well beyond the military domain. Security will likely be understood more expansively, increasingly encompassing the resilience of critical systems against environmental as well as military threats. Driven by the domestic demand outlined above, this shift is not an abstract concern but a concrete policy agenda.
The third is external projection and regional positioning. Shifting geopolitical dynamics will ultimately require greater regional economic engagement, even as post-war Gulf states turn inward in the short term. Sovereign wealth can launch new sectors, but sustaining them requires private capital, which in turn requires exportable demand beyond the Gulf’s small domestic markets. Incoherent US Middle East policy and the likely deterioration of Iran’s post-war economic position will together open a regional vacuum that only the GCC can plausibly fill in influence, development leadership, and institutional capacity.
GCC actors such as Masdar and ACWA Power have already established the capacity to deploy complex energy and infrastructure projects across the Global South. The capabilities underpinning this track record are transferable to climate adaptation: entities that have successfully financed and delivered utility-scale solar in Morocco or Uzbekistan carry the same institutional DNA needed to deliver coastal resilience infrastructure in Bangladesh or Indonesia, whether through existing national champions or new ones.
The Quieter Shift
The consequences of war are seldom unidirectional. Climate tech can emerge as a major sector in the Gulf precisely because the imperatives are mutually reinforcing: domestic investment builds capability, capability enables external deployment, and external deployment reinforces the strategic positioning underpinning GCC hegemonic ambitions in the post-war regional order.
The more consequential shifts may well occur in the quieter domain of sectoral reorientation, and climate tech is likely to be near its center. Early signals will be visible in sovereign wealth fund allocation decisions and in whether GCC industrial policies treat adaptation infrastructure as a strategic sector rather than an environmental afterthought.
Dr. Dawud Al Ansari is a Gulf Committee member of the Rihla Initiative for Green Economic Growth. He is a leading expert in geopolitics, energy, and development, specializing in global issues and GCC-related questions. As President of the Muscat-based Shaheen Institute for Strategy & Development, he leads research programs on foresight, economics, and strategic affairs.
Section: (rihla-initiative) Photo: Aleksey Kuprikov