Impact of West Asia conflict on the global data centre ecosystem

The article argues that India is well-positioned to become a leading global data-centre hub due to growing demand, policy support, and strategic location.

A large share of global internet traffic traverses undersea cables through the Red Sea and the Strait of Hormuz, regions facing tensions that can disrupt data routing and bandwidth.

Emerging concepts like 'data embassies' indicate a move toward hosting critical systems in stable, cross-border environments.

Firms are spreading infrastructure across regions and jurisdictions to reduce concentrated risk in response to geopolitical and energy pressures.

Energy considerations are central as data centres are highly energy-intensive, with disruptions in West Asia-linked energy markets potentially affecting costs and reliability.

The discussion expands from data sovereignty to compute sovereignty, aiming to keep infrastructure processing data secure and accessible across borders.

Union Budget 2026–27 proposes a long-term tax holiday, extending up to 2047, for foreign cloud providers using India-based data centres to serve global markets.

MeitY introduced a framework classifying government data by sensitivity, requiring sensitive datasets such as Aadhaar, PAN, passports, and tax records to be hosted on government or sovereign cloud infrastructure, with less sensitive data managed by empanelled providers under safeguards.

The Digital Personal Data Protection (DPDP) Act lays the groundwork for stronger data governance with a focus on consent, security, and accountability.

The article projects that in 2026 India will expand by nearly 30% with around 500 MW of new capacity added.

The US accounts for more than 40% of global data-centre capacity, underscoring the central role of American infrastructure in the worldwide digital ecosystem.

The ongoing West Asia conflict involving the US, Israel, and Iran has heightened attention to the resilience and security of data centres. The article notes a spate of incidents, including attacks on cloud infrastructure in the Gulf, that underscore vulnerabilities in what was previously treated as neutral infrastructure.

By 2025, India’s data centre capacity had grown to over 1,500 MW.

India's data centre capacity was about 375 MW in 2020.