Energy demand surges despite Iran conflict, AI drives new power needs

When Javier Cavada took stock of his company's business across the Middle East this year, he noticed something counterintuitive. The war in Iran, which began in late February and has tangled global supply chains into knots, seemed to have done the opposite of what you might expect—it had not dampened appetite for energy investment. If anything, the appetite had sharpened.

Cavada is the chief executive for Europe, the Middle East and Africa at Mitsubishi Power, the energy subsidiary of Mitsubishi Heavy Industries. The company operates in more than thirty countries, with deep roots in the Gulf. When he spoke to The National, he described what he was seeing as a paradox worth understanding: "It is quite the opposite. I would say things have accelerated." He interpreted the surge in contract signings and negotiated bookings not as recklessness, but as a signal. Investors and governments, he suggested, were betting that the conflict would resolve, and they wanted to position themselves for the growth that would follow. "The business will only be bigger," he said. "And what they want is to increase the certainty."

Mitsubishi Power has been embedded in Saudi Arabia for six decades. In October, the company opened an assembly facility in Dammam for heavy-duty gas turbines, a move aligned with the kingdom's Vision 2030 targets to cut emissions and develop local expertise. In January, it won a contract to supply turbines for a power and desalination project in Qatar scheduled to come online in 2028. The company also maintains a large service workshop in the UAE. The pattern was clear: Cavada's team was not retreating from the region. They were deepening their commitment.

But the real driver of this energy hunger was not geopolitics alone. It was artificial intelligence. Cavada called it the "new kid on the block," but its appetite was already enormous. McKinsey projects that global spending on data centers could exceed seven trillion dollars by 2030. The five hyperscalers—Amazon Web Services, Microsoft, Google, Meta, and Oracle—are expected to lead more than one trillion dollars in global AI investment this year alone. These companies have been forming partnerships with Gulf-based firms as the UAE, Saudi Arabia, and Qatar position themselves as regional AI hubs. The UAE's Stargate project, a joint venture with G42 and Microsoft, carries an estimated price tag of 1.5 billion dollars. Saudi Arabia has already built more than sixty operational data centers since Vision 2030 launched.

The cost of this expansion is not merely financial. In June, UN researchers released a sobering assessment: data centers were on track to consume twice as much electricity and water by 2030 as they did in 2025. That baseline was already staggering. In 2025 alone, data centers consumed 448 terawatt hours of electricity globally and 4.5 trillion liters of water. "AI is the biggest eater of reliable electricity that we have ever seen," Cavada said. The implication was stark: thermal plants, nuclear capacity, and storage systems would all need to expand in tandem.

This reality pushed Cavada toward a conclusion that might have seemed heretical a decade ago: no single energy source could shoulder the load alone. Wind, solar, gas, and nuclear all had a role to play. The Gulf was making what he called "unprecedented" investments in gas infrastructure while simultaneously building out solar farms, wind capacity, storage systems, and in some cases nuclear facilities. The goal was a flexible grid that could adapt to demand spikes without fracturing. "That's what we call energy security," Cavada explained, "not relying on one single source and on one single party or one single technology."

Yet the opportunity came with shadows. Supply chains were already strained. Talent was scarce—the region needed engineers and technicians who could build and operate these systems at scale. Cavada acknowledged the tension without flinching. "The opportunities have the shadow next to them, and the challenges have their brightness next to them as well," he said. "It's not black and white. It's pretty colourful today." As AI infrastructure continues its expansion across the Gulf, the region faces a test: whether it can build the energy systems to power the future without losing sight of the decarbonization goals that made the transition urgent in the first place.