Why China may dodge the worst of the Iran war oil shock even as crude tops $100

Large crude reserves, EV adoption and renewable expansion could limit China’s exposure to oil disruptions linked to the Iran conflict

• China's oil reserves cushion impact of Iran war price surge
• China's energy mix shift reduces reliance on Strait of Hormuz
• China's crude imports rose as Middle East tensions intensified

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Surging oil prices triggered by the war in Iran may have a smaller economic impact on China than on many other Asian economies, as the country has built large crude reserves and diversified its energy mix over the past two decades, analysts told CNBC.

Oil prices recently crossed $100 a barrel for the first time in four years as the conflict in West Asia raised concerns about potential disruptions to shipments through the Strait of Hormuz, a critical global energy chokepoint.

Analysts at OCBC said China could be “less sensitive to a prolonged closure of the Strait of Hormuz than many of its Asian peers” because the country has built large strategic and commercial crude reserves and accelerated its transition to electric vehicles and renewable energy, according to CNBC.

“China has accumulated one of the world’s largest strategic and commercial crude reserves,” the analysts told CNBC, adding that the country’s “rapid transition toward electric vehicles and renewable energy provides an additional structural hedge.”

China held an estimated 1.2 billion barrels of onshore crude stockpiles as of January, according to data cited by CNBC. Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, said on CNBC’s “Squawk Box Asia” that the reserves represent roughly three to four months of supply.

“That will delay the economic impact,” Doshi said, adding that China has spent the past two decades reducing its reliance on maritime oil flows.

Doshi noted that new overland oil pipelines and diversification toward renewable energy sources mean China now relies on the Strait of Hormuz for about 40 percent to 50 percent of its seaborne oil imports.

The Strait of Hormuz, located between Iran to the north and Oman and the United Arab Emirates to the south, connects the Persian Gulf to global shipping routes through the Arabian Sea. Around 31 percent of the world’s seaborne oil flows, roughly 13 million barrels a day, moved through the strait last year, according to data from Kpler cited by CNBC.

However, shipments through the strait account for only a limited share of China’s overall energy consumption. Nomura’s chief China economist Ting Lu told CNBC that oil transported via the route represents about 6.6% of China’s total energy use.

Natural gas imports through the route account for another 0.6 percent of China’s energy consumption, Lu said.

The figures highlight the extent of China’s gradual shift in energy strategy over the past two decades.

China remains the world’s largest crude oil importer, purchasing nearly twice as much crude as the United States, while India ranks third, according to data from the Organization of the Petroleum Exporting Countries (OPEC), CNBC reported.

Among the three largest oil consumers, the United States, China and India, India remains the most dependent on petroleum imports, accounting for about one-fourth of its total consumption, according to CNBC’s analysis of U.S. Energy Information Administration data for 2023.

China’s petroleum import share stood at around 14 percent of consumption, while the United States produces most of its petroleum domestically, the CNBC analysis showed.

China’s diversification strategy has also included a rapid expansion of renewable energy and electrification of transport.

Renewables, excluding nuclear power and hydropower, accounted for about 1.2 percent of China’s total energy consumption in 2023, according to CNBC calculations based on International Energy Agency data. That share stood at 0.2 percent two decades earlier.

India and the United States each recorded renewable shares of about 0.2 percent in 2023, CNBC reported.

China’s push into electric vehicles has also begun to reduce oil demand. Rhodium Group said in July 2025 that China’s adoption of electric vehicles, particularly in the trucking sector, had already displaced more than 1 million barrels per day of implied oil demand.

The research firm expected that figure to increase by another 600,000 barrels per day over the following year.

More than half of new passenger vehicles sold in China are now classified as new-energy vehicles, which rely primarily on battery power rather than gasoline.

“With road fuel demand already showing signs of peaking and renewable capacity expanding rapidly, China’s sensitivity to oil price fluctuations is declining on a year-on-year basis,” OCBC analysts told CNBC.

Electricity now accounts for a growing share of China’s total energy consumption, according to energy think tank Ember. The group said renewables provided around 80 percent of China’s new electricity demand in 2024.

Oil and natural gas together account for only about 4 percent of China’s power generation mix, far below the 40 percent to 50 percent share seen in many Asian economies, OCBC analysts told CNBC.

Coal remains a major energy source in China, however. The country was the world’s largest producer and consumer of coal in 2023, despite efforts to reduce carbon emissions.

China’s energy trade relationships also shape its exposure to Middle East disruptions.

Iran accounts for roughly 20 percent of China’s oil imports, though that volume could largely be replaced with increased shipments from Russia, said Ano Kuhanathan, head of corporate research at Allianz Trade, according to CNBC.

The greater vulnerability lies in the roughly 5 million barrels per day of oil China imports from other Middle Eastern producers through the Strait of Hormuz, Kuhanathan said.

As the Iran conflict enters its second week, the duration of the disruption remains uncertain.

“A shock like this would likely reinforce the direction China is already taking rather than change it,” Muyi Yang, senior energy analyst for Asia at Ember, told CNBC.

Yang said the crisis underscores the risks of relying heavily on imported oil and gas and highlights the importance of China’s transition toward renewable energy and broader decarbonisation.

At the same time, China may continue expanding its crude reserves.

The U.S. Energy Information Administration said in February that China is expected to increase its strategic oil stockpiles by about 1 million barrels per day in 2026.

China’s crude imports fell nearly 2 percent in 2024, according to Wind Information data cited by CNBC. But imports rose again as tensions in the Middle East intensified, increasing 4.6 percent to a record 580 million metric tons.

“China is materially exposed but more flexible,” Go Katayama, principal insight analyst at Kpler, previously told CNBC.