The semiconductor sector is facing growing pressure, threatening the global economy as a whole. The industry that produces the computer chips powering the digital world requires vast resources to operate efficiently, including critical minerals and large amounts of energy. With the war being waged by the United States and Israel in Iran, these supply chains are facing significant disruptions.

Although former US President Donald Trump said on Monday that the war would end “very soon,” concerns remain that the conflict and its repercussions could be long-lasting. Such a scenario could prove catastrophic for a wide range of global supply chains, in addition to the mounting human and environmental costs already emerging.

Computer chips are now an indispensable component of the global digital economy. As Duke University’s Deep Tech blog noted, semiconductors have “reshaped the digital era and are embedded in everything from satellites and smartphones to medical devices and electric vehicles.” Any disruption to their availability or increase in their cost could therefore have major consequences for producers and consumers worldwide.

Ray Wang, a memory analyst at SemiAnalysis, told CNBC: “A prolonged regional conflict could disrupt chip manufacturing by affecting access to materials such as helium and bromine. For now the impact appears limited, but if the conflict continues companies may need to reorganize their sourcing of these critical materials.”

The Middle East’s importance despite the focus on Taiwan

While more than 90% of advanced chips are produced in Taiwan, the Middle East remains central to supply chains. Qatar, for example, produces more than one-third of the world’s helium, a key element used in semiconductor cooling systems and circuit printing. Any major disruption to global helium supply—whether due to production or transportation issues—cannot easily be replaced with alternative materials.

The semiconductor industry was already facing major challenges due to the concentration of production in Taiwan, which itself faces energy security concerns and relies heavily on external imports, in addition to ongoing tensions with China. With global oil supplies now disrupted by the war in Iran, these risks could intensify and affect Taiwan’s vital energy supply, with broader consequences for the global economy.

Direct impact on South Korean chipmakers and the expansion of artificial intelligence

Semiconductor manufacturers in South Korea are facing an even greater shock than their counterparts in Taiwan, as they are the main producers of memory chips, which have seen rapidly rising demand due to the expansion of artificial intelligence.

If the prices of these chips rise significantly, AI activity could slow as costs become too high.

Jingjie Yu, an equity analyst at Morningstar, said: “This could significantly increase the total cost of ownership for hyperscalers, threatening the adoption of AI infrastructure. A prolonged war could lead to a decline in demand for memory chips used in AI.”

A new threat to digital infrastructure

The conflict has taken a dangerous turn for the technology sector after Iran’s Revolutionary Guard–affiliated Tasnim news agency published a list of “new targets” this week. The list reportedly included regional offices, cloud infrastructure, and data centers linked to companies such as Google, Amazon, Microsoft, Nvidia, IBM, Oracle, and Palantir.

The threats have not remained merely theoretical. Iranian drones reportedly targeted three AWS data centers in the United Arab Emirates and Bahrain, marking the first military attacks on US cloud service providers and causing fires, power outages, and disruptions to payment and banking services. AWS advised clients to shift computing workloads entirely outside the Middle East.

Direct economic consequences

Nvidia temporarily closed its offices in Dubai following the attacks, Amazon shut its regional offices, and Google employees in Dubai were stranded after flight cancellations.

Meanwhile, Samsung and SK Hynix have reportedly lost more than $200 billion in market value since the start of the war. South Korea’s Ministry of Industry also warned that the semiconductor supply chain depends on at least 14 inputs from the Middle East, in addition to helium.

Patrick Murphy, executive director of the geopolitics unit at Hilco Global, said: “Iran used to target oil fields, but its recent attacks on data centers in the UAE show that it now considers digital infrastructure a strategic target.”

Aluminum prices climbed on Thursday to their highest levels in nearly four years as concerns intensified over potential supply constraints to Europe and other regions due to shipping disruptions through the Strait of Hormuz amid the Middle East conflict.

The three-month aluminum contract on the London Metal Exchange rose 0.6% to $3,478.50 per metric ton after touching $3,546.5, its highest level since around March 2022.

Shipments from aluminum producers in the region—who account for roughly 9% of global supply—have been affected, raising fears that raw materials such as alumina could also face disruptions as they pass through the strait to reach these producers.

In an effort to ease some immediate concerns, Norsk Hydro announced that the Qatalum aluminum smelter in Qatar would end the curtailment that began last week and continue operating at about 60% of its production capacity despite reduced gas supplies. The company added that it is working to mitigate the effects of the curtailment and shipping disruptions.

Rising oil prices are another major concern for aluminum producers, as energy can account for 40% to 45% of aluminum smelting costs in some regions. The International Energy Agency confirmed that the Middle East war is causing the largest disruption to oil supplies in history.

Alastair Munro, senior base metals strategist at Marex, said current volatility in aluminum prices is being amplified by a short-gamma market structure in options trading, where market makers sell when prices fall and buy when they rise, increasing intraday swings.

Among other metals on the London Metal Exchange, copper slipped 0.1% to $13,032 per ton, zinc was steady at $3,310.50, lead rose 0.4% to $1,943.50, tin gained 0.8% to $49,320, and nickel edged up 0.1% to $17,710.

Bitcoin fell below the $70,000 level on Thursday but remained relatively supported as investors turned cautious following another surge in oil prices amid the escalating conflict in the Middle East.

The world’s largest cryptocurrency declined 0.7% to trade around $69,454 as of 02:14 a.m. New York time, with Bitcoin appearing to move within a narrow range around the $70,000 level while markets assess geopolitical developments.

Oil approaches $100 again, raising inflation concerns

Oil markets have been the main driver of risk appetite across financial markets. Brent crude climbed back above $100 per barrel after retreating from a peak near $120 reached on Monday, its highest level in about two years.

The latest escalation in the Middle East followed reports of attacks on two fuel tankers in Iraqi territorial waters, along with strikes targeting commercial vessels passing through the Strait of Hormuz, one of the world’s most important oil shipping routes.

About one-fifth of global oil supplies pass through the strait, while tanker traffic there has dropped significantly due to security concerns.

Rising energy prices have revived fears of global inflation at a time when central banks were preparing to consider easing monetary policy. Analysts believe that if oil prices remain above $100 for an extended period, it could complicate the Federal Reserve’s path toward rate cuts and put pressure on risk-sensitive assets such as cryptocurrencies.

In recent months, Bitcoin has often moved in tandem with risk assets, as traders worry that a new inflation shock could reduce liquidity across financial markets.

Investors are also awaiting important US economic data that could provide signals about the future path of monetary policy, including weekly jobless claims due later on Thursday and the Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — scheduled for release on Friday.

Limited moves in other cryptocurrencies

In the broader crypto market, most alternative coins moved only slightly amid the risk-off environment.

Ethereum, the world’s second-largest cryptocurrency, rose 0.2% to $2,027.84, while Ripple, the third-largest digital currency, fell about 1% to $1.37.

Oil prices surged sharply on Thursday as Iran escalated attacks on oil and transport infrastructure in the Middle East, raising fears of a prolonged conflict and potential disruptions to oil flows through the Strait of Hormuz.

Brent crude futures jumped $6.41, or about 7%, to $98.45 per barrel by 12:35 GMT after briefly touching the $100 level earlier in the session. US West Texas Intermediate crude also climbed $5.98, or 6.85%, to $93.23 per barrel.

The gains extended after US Energy Secretary Chris Wright told CNBC that the US Navy cannot currently escort ships through the Strait of Hormuz, though he said such a move could become “very likely” by the end of the month.

Brent had earlier reached $119.50 per barrel on Monday, its highest level since mid-2022, before retreating after US President Donald Trump said the war with Iran might end soon.

The International Energy Agency said the Middle East war is causing the largest disruption to oil supplies in the history of global markets, one day after approving a record release of 400 million barrels from strategic reserves.

In its monthly report, the agency said Gulf countries in the Middle East have reduced oil production by at least 10 million barrels per day, equivalent to about 10% of global demand. However, analysts at Energy Aspects expressed doubts that the full volume would actually be released, noting that 400 million barrels of oil and petroleum products would cover only about 25 days of the current supply disruption.

Goldman Sachs expects Brent crude to average around $98 per barrel in March and April before falling to about $71 in the fourth quarter. However, the bank warned that if oil flows through the Strait of Hormuz were disrupted for a month, average prices could rise to around $110 during the same period.

Analysts at ING said the only way to sustainably lower oil prices would be to restore oil flows through the Strait of Hormuz, adding that failure to do so could mean that further price peaks still lie ahead.

On the security front, reports said Iranian boats loaded with explosives attacked two fuel tankers in Iraqi waters, setting them on fire and killing one crew member after four vessels were struck by projectiles in Gulf waters.

Lebanon’s Hezbollah also launched its largest rocket barrage since the start of the war on Wednesday evening, prompting Israeli strikes on Beirut. The attack raised concerns that Yemen’s Houthi group could join the conflict alongside Iran, potentially worsening shipping disruptions in the Red Sea.

In an effort to offset supply losses, Saudi Arabia increased crude exports through the Yanbu port on the Red Sea in recent days. Meanwhile, China ordered an immediate ban on refined fuel exports during March as a precautionary step to prevent a potential domestic fuel shortage resulting from the Middle East conflict.