Hormuz’s Huge Impact on AI

The US and Israel launched a joint military operation against Iran, aiming to overthrow the Iranian regime. In response, Iran began targeting US bases in Iraq and the Gulf states with missiles and kamikaze drones. The attacks on military bases in countries portrayed as the most stable and peaceful in the Middle East, such as the United Arab Emirates (UAE), Qatar, and Saudi Arabia, also caused damage to civilian infrastructure in the region. The Aramco oil facility in Saudi Arabia was hit, and Ras Laffan, one of the world's largest LNG facilities in Qatar, was forced to halt production.

Following the death of Iranian Supreme Leader Ali Khamenei in US-Israeli airstrikes, Iran has begun to escalate its retaliation, announcing it will not allow ships to pass through the Strait of Hormuz.

The blockage of the Strait of Hormuz has marked a new phase in the war. Closing this passage, through which a significant portion of the world's oil and natural gas passes, will escalate the effects of the war to a global level. In addition to directly impacting the prices of everything we use and consume daily, its effects on the global chip industry may be far greater than anticipated.

Hormuz Dependency of Asian Economies

Approximately 20% of the world's oil and natural gas passes through the Strait of Hormuz. About 90% of the exported oil flows to Asian markets. As of 2024, more than 80% of the natural gas passing through the Strait of Hormuz also goes to Asian countries.

Japan imports more than 70% of its oil via the Strait of Hormuz, while South Korea imports approximately 65%. China, another important country, obtains about half of its oil through this route.

Japan meets 59% of its LNG (liquid natural gas) needs via the Strait of Hormuz, while South Korea meets 52% and Taiwan 33%.

Rising prices in oil and natural gas are triggering increases in the production costs of all goods. South Korea and Taiwan are two countries that produce critical chips, and price increases in these countries could affect all technology products.

South Korea's electricity generation is 80% powered by natural gas and coal. Disruptions in LNG imports directly impact electricity production. Factories producing critical technologies face the risk of not having enough electricity. The South Korean stock market has fallen by approximately 20% this week alone. The market has begun to price in a significant risk.

Asia Dependence of Global Chip Production

Global semiconductor (chip) manufacturing is heavily reliant on Asia-Pacific countries for both raw materials and advanced technology production capacity. It is estimated that approximately 63% of the global chip supply network is located in this region by 2025. China is critical for raw materials, while Taiwan and South Korea host some of the most advanced chip factories.

Taiwanese chip foundry company TSMC accounts for 65% of global chip production, but this figure rises to over 90% for advanced 3nm and smaller chips. The remaining approximately 10% is handled by South Korean company Samsung Foundries. These two companies account for almost all of global production, and while Taiwan is dependent on the Strait of Hormuz for about ⅓ of its electricity generation, South Korea is approximately 50% dependent.

Chip manufacturing involves processes that require a significant amount of electricity. Energy constitutes the most significant operational expense for chip foundries. For foundries that produce on advanced technology nodes and use Extreme Ultraviolet (EUV) lithography machines, energy accounts for 30% to 50% of their most significant expenses.

Taiwan and South Korea rely heavily on fossil fuels for electricity generation, which is so critical for their chip factories, and are entirely dependent on imports to obtain these fuels.

South Korea Dependence on AI

South Korea, which is heavily reliant on the Gulf for energy production, possesses a crucial advantage. South Korean companies Samsung and SK Hynix account for approximately 75% of global DRAM (memory chip) production. No phone, computer, etc., can be manufactured without memory chips. Furthermore, HBM (high-bandwidth memory) chips are used in the production of chips necessary for AI data centers, and Samsung and SK Hynix are two of the most important players in this sector.

AI chip manufacturing is both dependent on Taiwan and South Korea for advanced production processes and heavily reliant on HBMs (Heavy Memory Chips) produced by Samsung and SK Hynix. Samsung and SK Hynix hold a large market share in HBM production, which is indispensable for AI servers, with the exception of a few US-based companies. Including memory chip production, Samsung is actually the world's largest chip manufacturer.

Because HBM memory chips are critical for Artificial Intelligence, the world experienced a major RAM crisis in 2025. Manufacturers, due to high profit margins, began reducing the production of RAM needed for ordinary phones and computers and shifting towards the HBM market. This caused memory chip prices to increase by more than 200%. As a result of these increases, price hikes are observed in all newly released phone and computer products.

South Korea's dominance in RAM and HBMs, and AI's need for HBMs, brought about significant price increases in 2025. Now, disruptions in energy production and supply chains due to wars could trigger new waves of price increases, affecting many things, including phones and computers.

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Today, the effects of an unplanned war in the Middle East, one whose consequences haven't been fully calculated or which was started under duress, could be far greater than anticipated. Oil and natural gas prices could trigger an inflationary wave from Europe to the US. Furthermore, the inability to produce critical components necessary for global chip manufacturing and artificial intelligence chips could result in hundreds of billions of dollars in losses.