After AI shock, West Asia war adds fresh stress to IT growth outlook

Bengaluru: A raging conflict in West Asia may further complicate the demand recovery for Indian IT services companies, already grappling with disruption caused by the rapid adoption of artificial intelligence (AI).

According to analysts, a widening war involving Israel, Iran and the United States could destabilise global macroeconomic conditions by pushing up crude oil prices. While gold and silver prices may rise amid heightened uncertainty, technology spending, particularly in the oil and gas sector, is likely to come under pressure. Global oil prices have already been on an upward trajectory due to escalating tensions between the US and Iran. With the conflict intensifying, risks of further price spikes have increased. The Strait of Hormuz, through which over 20 per cent of global oil supply passes, has effectively come under threat of blockade, raising fears of supply disruptions. Brent crude settled at $72.48 per barrel on Friday.

Rising oil prices typically ripple through the global economy by driving up commodity costs, which could dampen enterprise technology spending if the conflict drags on. “Middle East is an important region for the Indian IT industry. Oil prices and shipping challenges will have a ripple effect,” said Pareekh Jain, IT outsourcing advisor and founder of Pareekh Consulting, in a social media post.

West Asia has emerged as one of the faster-growing markets for Indian IT services firms, contributing between 4 and 12 per cent of their revenues. Saudi Arabia and the United Arab Emirates account for the highest technology budgets in the region.

Major Indian IT companies including Tata Consultancy Services, Infosys, HCLTech, Wipro, Tech Mahindra, LTIMindtree, Coforge, Persistent Systems and Mphasis operate large delivery centres across the region. Over the years, enterprises and governments in West Asia have awarded several mega outsourcing contracts to Indian IT firms, including projects from state entities and large oil companies.

In the AI era, countries such as the UAE and Saudi Arabia have been aggressively investing in artificial intelligence, with plans to build large data centres and deploy AI-driven platforms and solutions. Many Indian IT professionals are increasingly looking at the Middle East as immigration to the US becomes more difficult. Any expansion of the conflict will be a concern,” said a senior HR professional.