The conflict in the Middle East threatens to weigh heavily on the global economy, with soaring oil prices expected to dampen GDP growth and prompt businesses and consumers to reduce technology spending, according to analysts at IDC.
The key question – and one with few answers – is how long the fighting will continue. The nearly three-week old war began Feb. 28 when Israel and the US launched attacks against Iran, killing that nation’s supreme leader, along with other top officials. In retaliation, Iran has effectively closed the Strait of Hormuz, interrupting the worldwide flow of oil.
Fighting that ends in less than three months would result in “moderately lower IT spending by the end of the year,” Stephen Minton, IDC group vice president, said in a webinar briefing this week. “If it goes on longer than that, that’s the point at which we would need to think about a more significant reduction in overall spending.”
Three scenarios
IDC outlined three potential scenarios, ranging from a brief conflict with minimal economic impact to a prolonged war that would significantly dent global IT spending levels.
The least disruptive view is that the conflict would last a matter of weeks, leading to a temporary spike in oil prices and only a small revision to the pre-war outlook for global IT spending. But with no sign of a ceasefire at the moment, analysts now consider a second scenario increasingly likely.
In that case, fighting could continue for months, ending by mid-year. That would lead to a “significant impact on the regional and the global economy,” said Minton, as energy costs soar, with oil prices hitting a full year average of $85 to $95 a barrel. Spillover effects would include higher energy costs for running data centers, increased manufacturing costs for components such as semiconductors, rising supply chain expenses, and broader inflationary pressures that erode IT budgets.
The result would be a small percentage fall in global IT spending growth for 2026 compared to pre-war estimates, dropping from 9.7% to 8.8% worldwide. For the US specifically, IDC expects growth would fall from 12.4% to 11.4%.
The research firm’s IT spending forecasts span purchases by enterprise, consumer and service provider customers.
The fallout is likely to exacerbate an expected decline in PC and smartphone shipments this year, already forecast to drop by more than 10% year on year due to a shortage of RAM. “This is all just making it more and more difficult for consumers — and businesses — to decide to invest in replacing their devices in the near term,” said Minton.
The third IDC scenario envisages a longer war that lasts more than three months. In that case, oil prices would remain over $100 a barrel for an extended period, with a more pronounced drop in IT spending globally. IDC didn’t give specifics on that scenario given the considerable uncertainty around how the situation might evolve.
Cuts to hardware budgets, but AI and cybersecurity protected
Fighting that lasts less than three months would involve “targeted” rather than broad cuts to spending, said Minton. That’s partly because IT budgets have become more resistant in an age of capex spending and multi-year subscription contracts.
If the conflict continues through the summer, businesses might reconsider renewing contracts for 2027, but the initial priority for cuts would likely be capital spending, with delays to hardware investments such as PC fleet refreshes, and “project-based IT spending,” that includes consulting services, said Minton.
IDC expects businesses would increase spending in certain areas, primarily in the form of budget reallocation.
“In this environment, cybersecurity remains one of the most resilient areas of IT spending,” said Ranjit Rajan, IDC research vice president, Worldwide C-Suite Tech Agenda.
“We’re already seeing a rise in cyber activity, including in malware, DDoS, attacks, phishing campaigns and attempts to disrupt critical infrastructure,” Rajan said, with sectors such as telecoms, utilities, and financial services firms often targeted during conflicts, alongside governments and cloud providers. “As a result, organizations now will accelerate investments in areas such as threat intelligence, incidents, response, security operation centers, disaster recovery and infrastructure hardening, to strengthen resilience.”
AI budgets are also likely to be ring-fenced. “AI remains a strategic investment priority globally, and it is expected to remain largely immune to sweeping IT budget cuts,” said Rajan. “Organizations could look to protect AI investments, because they are closely tied to long term competitiveness and productivity gains.”
In the Middle East, ‘resilient’ IT spending, questions over hyperscaler investments
In the Middle East and Africa (MEA) region specifically, IDC expects the Middle East and Africa will see IT spending growth fall from 4.9% to 3.7%, driven mostly by a drop in consumers; enterprise IT spending “is expected to be more resilient,” said Rajan.
“The duration of the war is the swing factor here; if it’s contained to under three months, we anticipate a partial recovery in the second half of ’26, as many projects might resume. But then, of course, budgets will be recalibrated,” said Rajan. “However, a longer conflict will stretch out decision cycles and push more projects into phased rollouts, scale downs and cancellations.”
Investments in cloud computing will remain on course, but business requirements are likely to change. “This conflict marks a substantial shift in the cloud industry,” said Rajan. “For the first time, major hyperscale regions are operating within an active conflict zone. That reality changes how enterprises think about geographical risk.”
Multi-availability-zone architecture will become the “minimum acceptable standard for enterprises,” he said, while “multi-region deployment will emerge as the default design for mission critical workloads.
“Resiliency will no longer be just a compliance checkbox, it is now increasingly becoming a board level concern that’s tied directly to operational continuity for enterprises, and of course, for SaaS providers who use these same cloud infrastructure facilities,” said Rajan.
One open question is how the conflict might affect ongoing hyperscaler investments in the region, given targeted military attacks on US-owned data center providers in the region. Several Gulf states had positioned themselves as attractive locations for AI infrastructure build-outs due to low-cost energy availability and access to advanced technology and capital, said Rajan.
“It’s still early to assess the impact of the conflict on these investment strategies,” he said. “The structural advantages that they had before still remain and exist.
“Having said that, geographical risk has increased, which could influence the timing and scale of some of these projects.”
