How Global Conflicts Force Local IT Decisions

Quick Summary

• Shipping routes are changing, freight costs are up and delivery windows are slipping
• State sponsored cyber attacks could cause havoc
• AI data centre demand is already hoovering up server chips, with conflict only making things worse
• War-risk and cyber insurance premiums are starting to climb
• Further supply, finance and security shocks look increasingly likely

Information correct at time of publishing. Check credible news outlets for the latest.

The headline-grabbing conflict between the United States, Israel and Iran has shocked the global economy, is pushing up energy prices, and is likely to increase inflation for UK consumers.

Beyond the mainstream headlines, there are big consequences for enterprises and IT departments in the UK. Increased costs, currency shifts, insurance, supply chain and cyber-security risks have all landed firmly in UK territory.

In this article we’ll take a look at the impacts that conflicts far away can have on local IT decisions. Some changes are already here, some are coming down the tracks, and a few are only just on the horizon.

How the Iran conflict is already hitting UK IT decisions

The time and monetary cost involved in obtaining hardware, powering it, protecting it and insuring it have all moved in the wrong direction during the past few weeks. This is hitting already stretched IT budgets and pushing lead times for hardware, some of which was already in short supply.

Here is a breakdown of what we’ve seen so far:

Disrupted sea lanes and rising freight bills

Major maritime transport companies have paused freight moving through the Strait of Hormuz. While we see headlines around oil prices, for IT decision makers, this could directly translate to:

• Reduced price protection terms: Suppliers may choose to reduce the timeframe in which they secure the price of stock, which could mean prices rise quickly in the market.
• Quote validity: Likewise, the timeframe for which a supplier will guarantee the price of hardware is also reducing. Contracts that used to allow a 30-day grace period are now slipping to 14 days or less.
• Temporary “war surcharges”: Within the industry, there are rumours and chat around the idea that suppliers and manufacturers might add surcharges to their hardware to create a “buffer” to protect against short-term shocks.
• Increased insurance costs for shipping companies, which will translate into higher costs for hardware.

Energy, currency shocks and sulphur shortages are increasing bills and component scarcity.

The rollercoaster cost of Brent Crude Oil has grabbed the headlines in the last week, gas supplies have been disrupted, and sterling has shifted down against the dollar. This is flowing directly into inflation for consumers and businesses.

For IT decision makers, be on the lookout for:

• As energy bills rise for data centre operators, expect price increases for your cloud computing costs
• While the UK government’s energy price cap protects consumers from unlimited bill rises, this does not cover UK businesses. Expect rises in bills and potentially lower budgets for IT projects as a result

The manufacturing process that creates semiconductors, which power everything from smartwatches to data centres, requires yellow sulphur. That is now almost impossible to get from the Middle East due to the closure of the Strait of Hormuz.

What’s more, due to the AI race at the big tech giants, data centre and hyperscaler chips are already in hot demand. The changes to freight costs, insurance premiums and supply chains associated with the conflict will only add pressure to this hardware constraint.

What you can do today: Your SaaS, IaaS and cloud agreements may contain price-variation clauses linked to wholesale electricity rates. Should the cost of energy skyrocket, you may be asked to pay more, even if you are mid-contract. Being aware of the contract you have now could prepare you for changes down the line.

Heightened cyber risk

The NCSC advisory urges UK organisations to review and improve their cyber security posture as pro-Iran groups are already actively targeting UK enterprises, and the conflict in the Middle East is likely to increase the threat landscape.

As organisations have increased and improved the complexity of their cyber security infrastructure, supply chains have fast become a weakness that allows access to larger organisations.

What you can do today:

• Review your security setup
• Refresh disaster recovery plans
• Place higher demands on your supply chain. Ensure suppliers are meeting auditing requirements and hold relevant certifications

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All of this added uncertainty will have a knock-on effect for IT projects. Expect to see more of this:

• Project timelines shift
• New projects being put on hold
• Data centre expansions slowing down
• Regional capacity constraints in some data centres
• Availability of everyday hardware such as new laptops declines and increases in price!
• Increased cyber probes to check for vulnerabilities

What might be coming next

While the cost of the conflict is already being reported and many of the effects are already here, there could be more just around the corner:

(Even) Longer enterprise hardware lead times

Our “Next Day Delivery” society has given us the impression that we live in a world of abundance. However, the reality is that we have a “Just in Time” supply chain, which the war in Iran has shocked considerably. Continued instability in the area, longer sea container shipping times and tighter air-freight capacity point to extra transit times – while restrictions on resources will only add to manufacturers’ woes.

Financing costs moving higher

Gilt yields have jumped since the conflict began, indicating lower confidence in the global market. Expectations are now on the Bank of England to maintain or even raise the Bank Base Rate as energy-driven inflation resurfaces. This could have knock-on effects for business and IT budgeting.

Heavier sanctions and compliance

In January the US and EU tightened export-control lists for dual-use electronics linked to Iranian drone programmes. The likelihood that these regulations will become even tighter looks increasingly probable. Expect more regulatory red tape should this occur.

Cloud infrastructure becomes a higher priority target and data sovereignty becomes even more important

Earlier in March, AWS reported that its data centres were deliberately targeted by aerial strikes from Iran. Iran aims to target US infrastructure to cause economic damage, and as The Guardian reports, “Data centres are becoming a target in warfare for the first time”.

Should this trend continue, moving data from Middle Eastern data centres back to safer havens in Europe could become necessary, but expensive.

While most UK businesses access hyperscalers and data centres in the UK & EMEA, there are several invisible, digital components that depend on Middle Eastern infrastructure, such as edge networks and routing, as well as global SaaS architecture.

As a practical step, it’s worth exploring and understanding where your key service providers host and transmit their data.

How the Trustco network can support you

In uncertain times and fluctuating markets, the right advice matters.

We help organisations review supply chains, secure technology availability, strengthen cyber resilience and plan IT investments with finance and leadership teams so surprises don’t derail business plans.

By staying closely connected to real-time lead times, daily pricing shifts and ongoing conversations with distribution networks, our logistics team gives you a clear, current view of the market.

We use that insight to help you prioritise effectively, plan costs with confidence and improve operational resilience, while unlocking advantages such as volume discounts and stock reservations.

With Trustco’s long-established connections with distribution networks across EMEA, and appropriate due diligence and security assessments completed as standard, we enable our customers to diversify vendors without compromising governance or risk controls.

Speak to Trustco sales or your account manager today to find out how we can help.