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Key Takeaways

• Oil pricing and supply disruptions are China’s top economic risks amid conflict in the Middle East. Half of the country’s oil imports flow through the Strait of Hormuz, and high fuel prices would put pressure on China’s consumption stimulus goals and continued reliance on manufacturing.
• However, China is relatively well-positioned to mitigate acute shocks, with strong reserves, fiscal controls, and alternate energy sources. China may also be partially shielded from effects by limited continued oil shipments through the Strait and alternate sources. China’s economy also posted strong performance during the winter months, providing extra cushion.
• The conflict will likely reinforce, not alter, Beijing’s broader economic calculus. China’s new five-year development plan prioritizes energy and industrial self-reliance, and conflict in the Middle East brings further urgency to these efforts.

State of Play

Analysts estimate the conflict in Iran will have limited impact on China’s economic growth, given China’s large strategic crude reserves (estimated at around four months of imports) and efforts to reshape the country’s energy strategy since 2010. These efforts have included maintaining coal production, diversifying oil imports, and rapidly expanding renewable energy.

Continued Iranian oil shipments and the availability of alternative suppliers may also reduce some of China’s exposure to disruptions. Since the conflict began on February 28, Iran has reportedly shipped at least 11.7 million barrels of crude to China through the Strait of Hormuz. In addition, Saudi Arabia is reportedly redirecting oil exports to the Red Sea, which may help offset disruptions in the Strait of Hormuz and provide another buffer for Beijing. Given these factors and absent severe, lasting damage to Gulf energy infrastructure, disruption to Iran’s oil flows may only shave tenths of a percentage point off China’s GDP growth.

However, longer-term energy and logistics price increases stand to stress China’s industrial sector and hinder efforts to promote consumption. If the conflict extends into the spring, China’s more energy-intensive chemical, refining, and heavy manufacturing industries would face sustained higher costs, which could constrain profit margins or raise producer prices and create downstream inflationary pressure. Key sources of risk include:

• Oil pricing: Sustained global oil prices of USD 90–100 per barrel, where crude has remained this week, would place significant pressure on China’s economy. This may be especially concerning as China’s manufacturing sector faces external pressures from tariff regimes, while weak domestic demand weighs on consumption. Higher industrial costs could complicate Beijing’s current reliance on exports to drive its economy.
• Gas pricing: Around 30 percent of China’s liquefied natural gas (LNG) imports flow through the Strait of Hormuz, with Qatar supplying around 20 percent of LNG globally. While LNG prices in Asia more than doubled in the first week of March, China is relatively insulated from price effects as gas demand enters a seasonal decline and buyers wait out spikes. Also dampening the impact is that LNG is generally procured via long-term purchase agreements, and almost half of China’s imported gas comes from neighboring countries.
• Industrial imports: China’s petrochemical industry is heavily dependent on Middle Eastern feedstock imports. While Chinese plants have not announced broad production shutdowns, operational disruptions are emerging. Wanhua Chemical has declared force majeure on some export contracts, and a CNOOC-Shell joint venture warned domestic customers it will not fulfill some orders. In addition, China’s industrial chemicals rely on the Middle East for other raw materials — namely sulfur — making fertilizers, battery materials, and other sulfuric acid supply chains susceptible to prolonged disruptions and cost surges. An extended disruption would also constrain China’s access to Qatari helium — critical for chip manufacturing — as disrupted flows tighten global supply and raise prices.
• Growing trade and investment in the Middle East: The region is a priority growth market for China’s trade diversification strategy. In the past five years, China has ramped up car exports, port development, energy infrastructure construction, and tech projects in the region, led by Saudi Arabia and the United Arab Emirates. Beyond shipping closures, Iran’s strikes on Gulf states create direct operational and political risks for Chinese firms and investments in the region.
• Headwinds for global exports: Shipping disruptions and geopolitical risks have raised shipping times, distances, and insurance premiums, raising the cost of international trade. Additionally, following record exports in 2025, Beijing’s policymakers may worry that prolonged instability could weaken global demand. Prolonged regional instability and high fuel prices could slow global growth and raise inflation, especially in key emerging markets for China’s manufactured products.

China’s Varied Mitigation Strategy

In response to these longer-term risks, China is temporarily using price controls, pursuing diplomatic resolutions, and stretching existing stockpiles.

• Price controls: China is stabilizing its fuel market through an administered pricing mechanism. The government recently raised its regulated gasoline and diesel price ceilings by around 8 percent, the highest single-day increase in four years, balancing consumer price pressures and refinery losses.
• Diplomatic maneuvering: Diplomats early in the conflict requested Iranian officials to maintain transit through the Hormuz. Reporting suggests tankers have gained passage by identifying themselves as having Chinese crews and ownership, a sign Iran has largely avoided targeting shipments to China.
• Strategies to maintain existing stockpiles: Many refiners also temporarily reduced output, using the disruption to complete maintenance ahead of schedule. Refineries across coastal provinces have reportedly cut utilization rates by around 8 percent, some up to 20 percent. As exports and throughput fall, tankers have begun idling off China’s ports, effectively creating a further supply buffer in case Gulf shipments decline. Although China’s estimated 3–5-month strategic crude stockpile is larger than most Asian importers, these measures further extend the lifespan of existing reserves.

Long-Term Implications 

In the long term, the Iran conflict stands to reshape Beijing’s energy trade practices and accelerate policy planning. In recent years, Beijing has viewed countries such as the United Arab Emirates and Saudi Arabia as stable, long-term anchors for commercial ties and Belt and Road expansion. The recent disruption, however, may push Chinese firms to source from and export to Asia, the Americas, and other markets, reducing reliance on Gulf energy exporters and vulnerable trade routes to Europe. This will present opportunities for major energy producers like Russia, Australia, Canada, and the United States to increase commodity exports to China.

While Beijing seeks to avoid long-term dependencies on Russia, the ongoing conflict may deepen China–Russia interdependence. China’s new 15th Five-Year Plan (FYP) references expanded cross-border energy infrastructure, and energy market and shipping disruptions could further incentivize China to expand overland imports, presenting an opportunity for Moscow to advance its strategic goals. Beijing will have political incentive to advance Russia’s Power of Siberia 2 pipeline, while Gazprom’s Amur-2 project — largely supported by investments from Chinese state-owned firms — will enter operation later in 2026. Chinese state-owned firms ‌Sinopec and PetroChina have reportedly begun to inquire about possible purchases of Russian oil, which would be their first since November.

The conflict may push Beijing to execute faster or more forcefully on its current energy security priorities — particularly those outlined in the 15th FYP. Specific examples could include further accelerating green energy deployment, especially wind and nuclear energy, while enhancing gas pipeline projects and continuing to rely on coal usage.