A new frontier in the war? A drone from Iran targeted a Du building in Fujairah yesterday, resulting in a “minor incident” with no injuries reported, state news agency Wam reports. This marks the first time Iran has targeted state-owned telecom infrastructure in the UAE, though it did previously target Amazon Web Services data centers in the UAE and Bahrain.

This is another hit to the UAE’s digital hub ambitions. After the targeting of data centers earlier in the conflict, which led to outages at dozens of regional companies, the UAE’s data hub ambitions were already shaken. The uncertainty around how the war will pan out and the potentially high costs of downtime and repair of data centers is likely to prompt a pullback from multinationals, one cloud security infrastructure specialist told us earlier.

This time it’s not a data center, but a facility owned by a state-owned telecom giant responsible for a massive chunk of the UAE’s digital and telecom infrastructure. “They are now targeting other industries and other infrastructure, which qualifies as a slight escalation,” MENA Economist Hamzeh Al Gaood told EnterpriseAM UAE.

This development adds to the risk premium that had already existed since the start of the war. “It’s economic pain, and it’s increasing the level of threat and risk on the GCC,” Al Gaood added, explaining that there will be a risk premium attached to telecom infrastructure associated with the fact that investments might be needed to repair facilities.

Plus: Iran is still targeting industrial sites. An office building belonging to tech firm Raneen Systems in the Industrial City of Abu Dhabi (ICAD) in Mussafah was also hit yesterday, resulting in one moderate injury, Wam reported separately.

But the bigger concern is what Trump might do today — and what that might trigger

“The real escalation would be power generation and desalination plants,” he confirms. “I am very worried about what happens if tomorrow really is the threatened ‘power plant day’,” director of Khalij Economics and GCC analyst for GlobalSource Partners Justin Alexander says, noting that Iran is escalating as the US and Israel escalate against it.

Iran and the United States are playing a game of tit-for-tat over what’s a fair military target, and there’s new risk that desalination infrastructure could be on the list.

Iran has threatened to hit desalination plants if Trump attacks its power plants. A desalination plant in Bahrain was already hit earlier in the conflict, as was a power and water desalination plant in Kuwait on Sunday, though Iran denied responsibility later, accusing Israel of carrying out the strike.

Why it matters: Gulf states rely on desalination for over 90% of their drinking water — and the UAE gets some 42% of its total annual water supply from it, according to data from the French Institute of Relations picked up by Bloomberg recently. This dependency varies across the Gulf, with Kuwait being the most dependent (about 90%), Oman trailing close behind (86%), Saudi Arabia relying on them for 70% of their water needs, and the UAE being the least exposed (42%).

Attacks on water infrastructure would be an existential threat to GCC nations, not an economic one, and would risk drawing them more directly into the conflict.

“Damage to individual pieces of telecom and tech infrastructure can be repaired. What really matters is having an environment of stability post-war in which confidence can be restored,” Alexander added.

The UAE is standing firm on its demands

UAE official Anwar Gargash reiterated that the UAE is calling for a ceasefire, but one that addresses the Strait of Hormuz and Iran’s missiles and drones as well as its nuclear program, Reuters quotes him as saying.

“We don’t want to see more and more escalation,” he said. “But we don’t want a ceasefire that fails to address some of the main issues ⁠that will create a much more dangerous environment in the region...notably (Iran's) nuclear program, the missiles and drones that are still raining down on us and on other countries."

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