On AI and Iran, Trump risks bombing himself in the foot
QQQ•A potential renewed US strike on Iran could push oil prices and inflation higher, prompting central banks to raise rates and increasing financing costs for AI data-centre projects. Brent crude rose above $115 a barrel late last week before falling more than 8% on Monday.
1. Oil and rates
A renewed Middle East conflict could intensify the oil shock, keep inflation elevated and lead the Federal Reserve and other central banks to tighten policy, raising funding costs for the data-centre buildout. Brent crude climbed above $115 a barrel late last week, then fell more than 8% on Monday amid optimism about a diplomatic resolution.
2. AI financing pressures
The large AI data-centre buildout requires substantial spending on chips, power, land and construction. Alphabet, Amazon, Apple, Meta and Microsoft are increasingly relying on debt for further capital spending, while CoreWeave faces borrowing costs above 15%, making new data-centre projects difficult to justify economically.
3. Possible feedback loop
The column argues that higher benchmark rates and wider credit spreads could raise the return hurdle for AI projects, potentially slowing investment if revenues do not justify spending. The scenario depends on an escalation in the Middle East, sustained higher oil prices and a forceful central-bank response; a diplomatic solution or temporary inflation spike could limit the increase in funding costs.
