The World Trade Organization's chief economist has issued a stark warning that an extended period of high oil prices, driven by the ongoing conflict in the Middle East, could significantly hinder the artificial intelligence boom. This alert comes as the WTO identifies the war and its ripple effects on energy and fertilizer costs as the primary risk to the global economy in its latest Global Trade Outlook report.
Energy-Intensive AI Faces Uncertainty
Robert Staiger, the WTO's chief economist, highlighted a critical link between the Middle East tensions and the AI sector. "There is an interesting possible interaction between the Middle East conflict and the AI boom, in part because the boom is very energy-intensive," Staiger explained. He cautioned that if energy prices remain elevated throughout the year, it could "put a crimp on the AI boom."
Staiger further noted the concentration of AI investment in a handful of large firms and the unproven nature of the technology's long-term returns, adding to the uncertainty. "Because that investment is very concentrated in a number of very large firms, and the technology is still ultimately unproven in terms of how much it can deliver, there is a bit of uncertainty there in terms of where the future's going," he stated.
AI's Dominance in Investment Growth
Underlining the sector's importance, the WTO's analysis revealed that AI-related goods accounted for approximately 70% of all investment growth in North America during the first three quarters of last year. This staggering figure starkly contrasts with the pre-2008 housing crash period, where property comprised only 30% of investment growth over three years.
Despite former President Donald Trump's protectionist policies, which escalated US tariffs to their highest levels in decades, global goods trade expanded by a robust 4.6% in 2025. This growth was largely supported by strong export performances from Asian economies.
Global Trade Growth Projections and Risks
The WTO anticipates a sharp slowdown in global goods trade growth this year, projecting a rate of just 1.9%, even without a prolonged energy shock. However, the organization warned that a year-long period of high energy prices could deduct an additional 0.5% from goods trade growth and jeopardize food security.
"Risks to the forecast are tilted to the downside, and are mostly linked to the conflict in the Middle East through higher energy prices, which could weigh heavily on output and trade unless they are short-lived," the report stated. It further emphasized, "Given that the Gulf region is a major exporter of both energy and fertilisers, a prolonged interruption in supply could ripple across food systems, exacerbating the effect of pre-existing export restrictions."
WTO's Relevance in a Protectionist Era
The WTO has faced challenges in maintaining its relevance during Trump's second term, as the US administration has imposed tariffs disregarding the organization's rules. Concurrently, rival economies have broken their own commitments by entering into deals with Washington, further complicating the global trade landscape.
This complex interplay of geopolitical conflict, energy markets, and technological investment underscores the fragile state of the global economy, with the AI sector's future now intertwined with volatile oil prices and international tensions.
