Getty Images

Israel-Hamas war could affect tech industry in Middle East

U.S. businesses investing in the Middle East should engage in contingency planning if the Israel-Hamas war leads to the involvement of nearby regions.

Listen to this article. This audio was generated by AI.

The war between Israel and Palestinian militant group Hamas has affected the Israeli tech sector, as the reservist call-up has reduced staff at tech startups. For now, the war's effect on the tech industry is limited, but that could change if the conflict broadens.

The Israeli tech sector alone contains 6,000 active tech startups and sees significant investments in research and development from major U.S. companies, including Intel, Microsoft, Google, Apple, Meta, IBM, Cisco and many others. Companies are feeling the effects of the war between Israel and Hamas, with IBM condemning the Hamas attacks on Israel following the deaths of an IBM employee and an IBM retiree.

Armis, a U.S.-based cybersecurity firm with a strong presence in Israel, has seen around 5% of its Israeli employees called up from the reservists to rejoin the Israeli military.

"These employees have been given additional support as they stand on the front line to defend Israel, and we are honored to support them," an Armis spokesperson said. "The business and high-tech sectors in Israel have collectively come together to provide additional help and assistance with food, equipment and resources as needed."

While the tech sectors in Israel and the Palestinian territories are experiencing the effects of the war, the tech sector impact could become much larger should other regions get involved, said Yugal Joshi, business leader for technology services research at research firm Everest Group.

Joshi said he does see businesses concerned about the Israel-Hamas conflict, but it's not to the level of concern that would occur should the war broaden. If the war "does blow up into something bigger, frankly, all bets are off," he said.

War could have significant effects on tech sector

U.S. companies, especially cloud vendors, are investing in the Middle East in countries such as Egypt, Saudi Arabia, Qatar and the United Arab Emirates, Joshi said. Indeed, Amazon Web Services launched the AWS Middle East (UAE) Region last year, which invests $5 billion in the region over the next 15 years. Google launched a new cloud region in Qatar in May.

Should the Israel and Hamas war spill into these neighboring countries where large tech companies have launched cloud infrastructure projects, a lot of the work being done could stop, either due to the war itself or through potential U.S. influence, Joshi said.

"Let's say the Middle East countries get embroiled in this -- will the U.S. put some technology export restrictions like they did for China? There could be hundreds [of businesses] impacted," he said.

Indeed, while CIOs are likely prepared to deal with the short-term consequences of such conflicts, if the entire region engages in the conflict, "that's a different story," said Ray Wang, founder and principal analyst at Constellation Research.

"There's a lot of money in the Middle East at the moment, from Dubai to Saudi Arabia to Qatar," he said. "There's a lot of investments going on there. That would derail a lot of those projects."

Risks rising from Israel-Hamas war

Following Hamas' attack on Israel on Oct. 7, politically motivated hackers began attacking business websites. The Jerusalem Post, an English-language newspaper based in Jerusalem, went down due to a series of cyber attacks in the aftermath of the Hamas attack.

Cybercrimes tend to rise during times of conflict, meaning that businesses need to remain vigilant on cybersecurity, said Peter Halprin, a partner at law firm Pasich.

There can be significant disruptions to supply chains, so how do you position yourself to address that when that comes up?
Peter HalprinPartner, Pasich

"Phishing schemes are probably the way that most of these folks are getting in," he said. "You really want to keep your workforce vigilant and adopt a conservative policy toward email."

Along with potential cyber-risks, Halprin said the risk of a wider regional war in the Middle East is something businesses should also be paying attention to. He said business leaders should engage in contingency planning focused on how to respond to such a situation.

"There can be significant disruptions to supply chains, so how do you position yourself to address that when that comes up?" Halprin said. "There can be issues with getting your personnel. This happened during [Russia's invasion of] Ukraine too -- there were a lot of companies that had call centers and IT and other functions in Ukraine. They had to deal with the fact that people had to hide in bomb shelters during the day or were conscripted or reservists who enlisted."

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

Dig Deeper on Risk management and governance

Cloud Computing
Mobile Computing
Data Center
and ESG