The conflict may divert data centre investments slated for the Middle East to Southeast Asia.
TA Research said the Iran War raises concerns on the region’s geopolitical stability, infrastructure resilience and security, triggering potential diversification of the Middle East’s huge pipeline of DC investments into other more stable regions.
“Southeast Asia, especially Johor, could benefit from the spillover having established itself as one of the key DC investment hubs in Asia Pacific,” it said in a utilities sector report today.
The research house noted the Middle East DC market is on the cusp of significant expansion with 2.2GW currently under construction and another 12GW capacity planned.
Citing Cushman & Wakefield’s second half of 2025 DC update, TA said Johor currently has 897MW DC capacity in operation while 315MW is under construction, and another 2.1GW planned.
“This positions Johor as the third-largest DC hub in Asia Pacific and the largest in terms of pipeline investments,” it added.
It also picked YTL Power International Bhd as a potential beneficiary of this diversion of Middle East DC investments into Southeast Asia.
The conflict has seen attacks on DC assets in the Middle East, particularly those linked to US companies.
In March, Iranian drone strikes hit facilities operated by Amazon in the United Arab Emirates and Bahrain, while an attack in April targeted a facility linked to Oracle in Dubai.
The attacks disrupted digital services including financial transactions and social media, raising heightened concerns about business continuity in conflict-prone regions.
Malaysia stands out as a natural alternative due to its cost competitiveness and political stability.
Even before the war, Malaysia had attracted DC investments from global hyperscalers and technology firms seeking alternatives to Singapore due to land and power constraints there.
Boost for RE sector
TA said another beneficiary of the Iran War is the country’s renewable energy (RE) sector.
“Rising grid power cost as a result of higher fuel prices improves the economics and could drive stronger demand for RE as a cheaper alternative for consumers,” it said.
This is complemented by the government’s recent launch of the Sustainable Rebate and Incentive Assistance Home initiative that provides rebates for domestic users who install solar systems for their homes, it added.
It picked Samaiden Group Bhd as one of the key beneficiaries of an expected record high RE rollout over the next two to four years.
TA also maintained its “overweight” call on the utilities sector. - FMT
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