Wired for power: digital technology as the MENA’s new geopolitical axis
Wired for power: digital technology as the MENA’s new geopolitical axis
Wired for power: digital technology as the MENA’s new geopolitical axis
Trend Report 4 / January 2026 by Emiliano Alessandri
Executive Summary
- In 2026, the Middle East and North Africa (MENA) will be shaped by developments around the US-brokered truce in Gaza and the situation in Iran, but also by a less scrutinized reordering trend: the emergence of digital power as a geopolitical driver.
- The Gulf States are expected to continue their rapid rise as digital powers, adding more computing capacity, leveraging AI, and propping up the region as a whole as a major global digital hub.
- For its part, Israel is set to remain a technological powerhouse in its own right, but its role as the regional tech leader will be challenged by capacity limits and possible domestic uncertainty.
- Scenarios include a bipolar MENA in which technology contributes to normalization and stability, but also an increasingly technologically Gulf-centered region in which Israel is more isolated and technology fuels new tensions.
Zusammenfassung
- Im Jahr 2026 wird der Nahe Osten und Nordafrika (MENA) nicht nur durch die Entwicklungen rund um den von den USA vermittelten Waffenstillstand in Gaza und die Situation im Iran geprägt sein, sondern auch durch einen weniger beachteten Trend der Neuordnung: den Aufstieg digitaler Macht als geopolitischer Faktor.
- Es wird erwartet, dass die Golfstaaten ihren rasanten Aufstieg als digitale Mächte fortsetzen, indem sie ihre technologischen Kapazitäten ausbauen und KI nutzen, um die Region als bedeutendes globales digitales Zentrum zu positionieren.
- Israel wird seinerseits eine treibende technologische Macht bleiben, jedoch in der Rolle als regionaler Technologieführer durch Kapazitätsgrenzen und mögliche innenpolitische Unsicherheiten herausgefordert werden.
- Die Szenarien reichen von einer bipolaren MENA-Region, in der Technologie zu Normalisierung und Stabilität beiträgt, bis hin zu einer zunehmend technologisch auf die Golfstaaten zentrierten Region, in der Israel stärker isoliert ist und Technologie neue Spannungen schürt.
Keywords: artificial intelligence, digital infrastructure, MENA, Gulf States, Israel
Across a region often described as trapped by its past, the rapid expansion of digital technologies is becoming a powerful factor for change, driving the emergence of “digital geopolitics.” Digital transformation may prove just as strategically consequential for the MENA region as chronic intra-regional rivalries and the legacy of recent conflicts. Significantly, the AI race is changing internal power balances while propping up the region as a whole as a digital pole of major significance in a global landscape dominated by the US–China competition for technological dominance.
The story starts with connectivity. The Gulf States, led by the United Arab Emirates, Qatar, and Bahrain, have reached nearly universal internet penetration. This places them among the most connected societies in the world. Widespread connectivity is enabling the adoption of digital public services and fostering a rapid expansion of e-commerce. It is also enabling a fast-developing ecosystem of Gulf-based data-driven industries (Bi et al., 2025). Israel also benefits from very high connectivity rates. The country has leveraged the rapid deployment of fiber networks and early rollout of 5G technologies. For a long time, Israel has boasted one of the most digitally advanced economies in the world (Senor & Singer, 2009). In contrast, mid-ranking MENA economies such as Jordan, Morocco, and Tunisia show uneven progress, with rural areas still significantly underserved and entire sectors of the economy lagging in basic digitalization. Further down the list, conflict-affected states—such as Yemen and Syria—remain constrained by inadequate infrastructure, digital divides cutting across key societal groups, and a level of overall internet penetration often below 40%. These disparities are directly influencing the ability of individual MENA states to integrate into the emerging AI economy.
The AI Race
Investment in AI and associated digital infrastructure is becoming a central arena of intra-regional competition. The picture is a highly dynamic one. In recent years, the Gulf States have decisively outpaced their regional peers. Between 2020 and 2025, the Gulf Cooperation Council collectively invested more than $50 billion in AI (McKinsey, 2025). Saudi Arabia and the UAE are leading efforts to build regional clusters of compute power, data center capacity, and advanced analytics capabilities. Saudi Arabia’s Vision 2030 strategy has already created dedicated ecosystems for model training, robotics development, and experimentation with “smart cities.” The UAE aims to become a leading AI hub through the establishment of multiple cloud regions, which are localized data center clusters connected by high-speed, low-latency, centrally managed networks. Abu Dhabi is also proactively fostering AI startups through government-backed research centers. Building on digital infrastructure partly developed in the run-up to the 2022 World Cup, Qatar is investing heavily in logistics AI.
While still a global leader in cybersecurity and deep-tech research, Israel faces some challenges when it comes to the AI race (Jerusalem Post, 2025). AI is being applied across vast sectors of the economy, and Israel’s highly controversial military campaign in Gaza was significantly empowered by AI. But outside of the security domain, AI is not being mainstreamed in the same centralized manner that is seen in the Gulf region. More crucially, limited foreign venture capital inflows and constraints in scaling compute infrastructure are tempering expectations as to Israel’s rise as an AI power.
The emerging digital geopolitics of the MENA region is also shaped by external influences. The United States, recognizing the Gulf’s massive investment in digital technologies, has deepened collaboration with Gulf States, including as a way to recruit regional clients and garner much-needed resources for its escalating competition with China (War on the Rocks, 2025). US–Gulf technology-related cooperation involves, among other initiatives, massive financial investment, joint research programs, semiconductor supply chain agreements, and expanded cloud security coordination.
Mixing personal and strategic interests, US President Donald Trump and his extended family seem to be increasingly focusing on the Gulf, which was the destination of an extensively marketed foreign visit at the beginning of Trump’s second term. Record-breaking business deals and investment commitments made in 2025 were reportedly valued at around $1 trillion. This includes Saudi company DataVolt’s $20 billion investment in AI data centers and US energy infrastructure as well as $80 billion from a consortium of US tech companies for new tech investments in both the USA and Saudi Arabia (The White House, 2025). The world’s leading chip manufacturer NVIDIA also signed a deal to supply advanced AI chips to the Gulf.
For its part, Israel continues to enjoy strong cooperation with Washington, especially in defense AI and cybersecurity. Yet, it cannot commit the same level of resources—nor offer the same scale of AI development and application—that Gulf States are now able to provide.
The contest for leadership
For decades, Israel stood as the uncontested technological powerhouse of the Middle East, benefiting from military-driven innovation, a dynamic venture capital ecosystem, and the region’s highest expenditure in research and development. Yet the 2020s have introduced new dynamics that now challenge this dominance. Gulf States have increasingly leveraged their sovereign wealth funds, which are worth hundreds of billions of dollars, to enable targeted strategic investments in digital technology, based on the view that data and compute power are the new oil. This has led to raising their stakes in global AI firms and semiconductor ventures. Large-scale investments are also being made in R&D.
Compounding these developments are human capital strategies. Israel continues to have a significant share of its workforce employed in the tech sector. Yet, despite a high concentration of AI talent, the number of local graduates with advanced tech degrees seems insufficient to meet the surging demand. In contrast, Gulf States have made remarkable strides, launching national AI curricula, coding literacy campaigns, and tailored scholarship programs. They are also proactively attracting global talent at record levels.
The Gulf has also aggressively expanded physical AI infrastructure, a key asset in the AI race. By 2025, the region housed more than 35 hyperscale or large-scale data centers, compared to fewer than ten in Israel. This infrastructure provides the compute power necessary for training and deploying large AI models. It will support the integration of AI into energy systems, logistics, healthcare, and governance.
Israel faces hurdles in physical AI infrastructure related to massive energy demands and water for cooling data centers. Moreover, the Gaza War has diverted attention and resources elsewhere while creating uncertainty for international investors. A polarized political landscape in which extreme forces exert disproportionate influence could also become a complicating factor for Israel, leading to parliamentary conflicts and policy disputes, less favorable conditions for tech-driven public-private partnerships, and potentially a less conducive environment for scientific innovation overall.
Divergent Digital Futures: Bipolarity or Imbalance?
In an optimistic scenario, the region’s accelerating digitalization leads to a largely bipolar distribution of technological power. The US remains an active extra-regional partner in this scenario, supporting both Israel and the Gulf while making sure that America’s influence remains preponderant over China’s. The Gulf’s dominance in infrastructure and applied AI complements Israel’s continued strength in defense innovation and cybersecurity, potentially creating a dual ecosystem. Indeed, digital transformation could support the logic of regional diplomatic engagement, possibly extending the momentum of normalization initiatives such as the “Abraham Accords,” which already envisage robust cooperation in areas such as cybersecurity, AI, fintech, and agritech (Kateb, 2025). The result could be relative stability and significant cooperation incentives for Israel and the Gulf States, which could ultimately join forces toward turning the Middle East into a global digital hub, potentially a third pole in the US–China competition for technological dominance.
By contrast, a second scenario could envision the emergence of an increasingly imbalanced tech order of the Middle East in which the Gulf progressively establishes itself as the region’s lead digital power, while Israel’s countermeasures risk fueling new tensions. Perceiving its historical technological superiority under threat, Israel could attempt to accelerate investment in AI-driven defense systems and further expand its cyber capabilities. But this would only reinforce regional concerns about Israel’s unconstrained military power. If linked to the “Super Sparta” autarchic vision as recently outlined by Israel’s Prime Minister Benjamin Netanyahu, this approach could lead to a situation where regional mistrust deepens and the AI race becomes a highly divisive factor in the MENA (The Times of Israel, 2025).
In this scenario, digital power would exacerbate geopolitical competition. The Gulf’s digital ascent would inevitably draw the attention of America’s competitors, starting with China. Beijing could try to sway the region in its direction by offering attractive economic benefits to select Gulf States. In response, Washington could further leverage defense cooperation and arms sales to the Gulf to deter any dealignment, but the Gulf monarchies could nonetheless hedge their bets, keeping their strategic options as open as possible. Intra-Gulf competition, already visible between Saudi Arabia and the UAE, could compound this scenario. For its part, Israel’s relative decline would make traditional US support more crucial. At the same time, however, the country’s diminished strategic weight could reinforce tendencies in America calling for a less axiomatic relationship with Israel. All in all, the US and its regional allies would face difficult strategic trade-offs and significant geopolitical risk in this scenario.
Whether either one, or a mix, of these outlooks will eventually materialize, what is clear is that digital transformation is no longer a technical matter but a central determinant of power, prosperity, and security in the Middle East. Most importantly, the region’s technological evolution is not separate from its political trajectory—it is already very much shaping it.
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