The ViewWhy Asia’s data centres are insulated from Iran energy shock

Before the war in Iran erupted, China, India, Japan and South Korea accounted for 75 per cent of oil and 59 per cent of liquefied natural gas (LNG) flows through the strait. In a report on March 6, Nomura said Asia was the “epicentre of the energy security shock” and faced “potential stagflation if disruptions persist beyond a month”.

As the war enters its second month, the one thing that is certain is that physical shortages of oil, gas and other strategic commodities will persist long after the conflict winds down as supply chain disruptions linger and inventories are rebuilt.

Asia’s acute vulnerability to the shock has put the region’s power-hungry data centre market under scrutiny. In 2024-25, the Asia-Pacific accounted for about 30 per cent of data centre operational capacity worldwide and nearly a quarter of the facilities currently under construction. Transaction volumes were higher than those in the professionally managed rental housing and hotel sectors, according to MSCI data.

Yet unlike traditional types of commercial property, development and investment in data centres is less about the amount of capital deployed and more about sourcing the electricity needed to power rapid growth. A unique blend of real estate, infrastructure and technology, the data centre sector “needs affordable, reliable and clean energy to scale to its full potential”, Deloitte said.

The energy crisis has amplified vulnerabilities in the sector, putting the economics of building and financing data centres under sharp scrutiny. Power generation is a particular concern in Asia, given that several countries rely on imported fuel to supply electricity. Nomura notes that nearly 30 per cent of South Korea’s power generation is gas-fired, with the Middle East accounting for almost a quarter of its LNG imports.