Commentary: Hormuz is the hidden risk to the AI economy

It’s easy to think of artificial intelligence as weightless code running in the cloud. In reality, the AI boom sits on a bedrock of energy, materials and shipping routes—none more critical than the Strait of Hormuz. If that narrow waterway in the Persian Gulf falters, the world’s digital ambitions, from streaming AI video to training frontier models, feel the shock.

Silicon needs energy—and much of it traces back to the Gulf

AI’s data centers and device supply chains hinge on two intertwined dependencies: semiconductors and electricity. More than half of the world’s DRAM and NAND memory is produced in South Korea, while Taiwan fabricates the lion’s share of the most advanced logic chips that power smartphones, PCs and hyperscale servers. Those factories run on immense, round-the-clock electricity demand. A substantial portion of that power in both economies comes from imported liquefied natural gas (LNG), much of it sourced from producers whose cargoes pass Hormuz.

Qatar’s Ras Laffan complex alone underpins roughly a fifth of global LNG trade, and the vast majority of cargoes from Qatar and the United Arab Emirates sail east to Asian buyers. When disruptions strike in or around the strait, Asia’s gas markets tighten quickly—and the world’s chipmaking engines begin to look exposed.

One chokepoint, global ripple effects

Unlike Europe, which after the 2022 energy shock built up buffers to cover a sizable share of annual gas needs, South Korea and Taiwan maintain relatively thin storage. South Korea typically holds less than two months of LNG imports; Taiwan has under a month. Once the vessels already underway have discharged, extended turmoil at Hormuz can rapidly squeeze power systems. For nations hosting the fabs that produce memory and cutting-edge processors, even small interruptions risk cascading through electronics supply chains and AI buildouts.

Markets understand this fragility. When shipping or energy infrastructure in the Gulf comes under threat, shares tied to memory and foundry output often wobble first. Investors aren’t just pricing commodity risk; they’re pricing the heartbeat of the digital economy.

Short-term cushions are costly and limited

There are safety valves, but none are painless. Spot LNG from the United States or Australia can replace lost volumes, yet at a premium that escalates if the disruption endures. Some buyers can swap cargoes or re-route deliveries, and countries with more diversified supply—Japan among them—may free up shipments in a pinch. Still, these maneuvers compete with winter weather, storage levels, and shipping availability. In tight markets, the price shock lands on utilities, manufacturers, and ultimately consumers.

The policy trap in Northeast Asia

The deeper vulnerability stems from policy choices that have left clean power scarcer and pricier than it needs to be. In Taiwan, the wind-down of nuclear capacity has removed firm low-carbon power even as rules have made large-scale solar harder to deploy. South Korea has begun to loosen constraints on renewables, but permitting snarls, land-use limits and local opposition have slowed onshore wind to a crawl. Offshore wind—where both countries have world-class resources—has struggled under complex approvals and domestic-content rules that raise costs and delay projects.

The result is paradoxical: on a planet where new wind and solar now beat fossil generation on cost in most regions, the democracies that manufacture the chips at the core of AI still lean heavily on imported gas and oil that transit a volatile strait.

A resilience agenda for the AI era

Reducing exposure to Hormuz is not a call for autarky—it’s a plan for resilience. The fastest, cheapest risk hedge is an accelerated clean-energy build paired with storage and grid upgrades, so fewer electrons depend on a single shipping lane. Priority steps include:

• Fast-track permitting for onshore wind and utility-scale solar with clear, science-based siting rules and community benefit-sharing to address local concerns.
• Unlock offshore wind by streamlining approvals, clarifying seabed rights, and enabling bankable offtake contracts rather than rigid local-content mandates.
• Expand firm, low-carbon capacity—through life extensions or new builds where safe and economical—including nuclear, geothermal and modernized hydropower.
• Scale grid storage (batteries and pumped hydro), flexible demand programs, and transmission to integrate variable renewables and stabilize supply for 24/7 industrial loads.
• Enhance LNG resilience as a bridge: add storage, diversify suppliers, and secure flexible contracts that allow swaps and destination changes during crises.
• Decarbonize fabs and data centers directly with on-site solar, storage, waste-heat recovery, and 24/7 clean power purchase agreements backed by firming.
• Improve efficiency across AI workloads through better cooling, chip design, and siting new capacity in regions with abundant clean energy.

Why ecology and security now converge

This is as much an ecological inflection as a strategic one. Every megawatt added from wind, solar, hydro, geothermal or advanced nuclear reduces emissions—and also trims the geopolitical premium baked into fossil fuels. Cleaner power shortens supply lines, cuts volatility, and gives chipmakers and AI platforms a steadier foundation. It is climate policy and national competitiveness rolled into one.

The hidden cost of a narrow strait

For all the talk of “sovereign AI,” true digital sovereignty depends on secure, affordable, low-carbon electricity. As long as the world’s memory and leading-edge logic are concentrated in gas-dependent grids that look toward a single maritime chokepoint, the AI economy will carry a hidden Hormuz risk. The way out is clear: build more clean power, faster; firm it; and design markets and infrastructure around resilience. That is how Asia’s technology powerhouses—and the global AI ecosystem that relies on them—turn a fragile dependency into durable strength.