The recent surge in global oil prices following the escalation of conflict involving Iran has intensified concerns about energy security across Asia. Crude prices crossing the $100 per barrel threshold for the first time in nearly four years have renewed fears of supply disruptions, particularly if shipping through the Strait of Hormuz is disrupted. Yet analysts suggest that China may be better positioned than many of its regional peers to absorb the shock, thanks to decades of strategic planning in energy diversification and stockpiling.

The Strait of Hormuz remains one of the world’s most critical energy transit routes. Roughly 31 percent of global seaborne oil shipments about 13 million barrels per day passed through the strait last year, making any conflict in the region a major risk for global energy markets. The ongoing geopolitical tensions have therefore pushed energy prices higher as traders factor in potential disruptions.

Despite these risks, China’s economic exposure to such shocks appears comparatively limited. Over the past two decades, the country has systematically built one of the world’s largest crude oil stockpiles. Estimates suggest China holds around 1.2 billion barrels of onshore crude reserves, equivalent to roughly three to four months of supply. These reserves include both strategic petroleum reserves and commercial storage, giving Beijing the ability to cushion sudden supply disruptions.

Analysts note that such reserves effectively delay the economic impact of supply shocks. If shipping routes were temporarily disrupted, China could draw down these reserves to stabilise domestic supply and mitigate immediate inflationary pressure.

China’s energy diversification strategy extends beyond stockpiles. The country has gradually reduced its reliance on maritime oil imports by building overland pipeline networks and diversifying suppliers. While the Strait of Hormuz still accounts for around 40–50 percent of China’s seaborne oil imports, the overall exposure is smaller when measured against total energy consumption.

In fact, oil transported through the strait represents only about 6.6 percent of China’s total energy use, according to energy economists. Natural gas shipments through the same route add roughly another 0.6 percent, highlighting how the country’s broader energy mix has evolved over time.

China’s transformation of its energy structure has been one of the most significant shifts in the global energy landscape. While it remains the world’s largest crude importer, the relative share of petroleum in its overall energy consumption has declined. Petroleum imports account for about 14 percent of China’s energy consumption, compared with around one-fourth in India, making India significantly more dependent on imported crude.

Another critical factor reducing China’s vulnerability is the rapid electrification of transport. Electric vehicles have expanded aggressively across the country, with more than half of new passenger vehicles now classified as new-energy vehicles. According to research estimates, the adoption of electric trucks and passenger vehicles has already displaced more than one million barrels per day of oil demand, with further reductions expected as adoption continues.

Renewable energy expansion has reinforced this structural shift. Two decades ago, renewable sources contributed only a negligible share of China’s energy mix. Today, renewable energy excluding hydropower and nuclear accounts for around 1.2 percent of total energy consumption, and the share continues to grow rapidly as the country invests heavily in solar and wind capacity.

Electricity is increasingly replacing fossil fuels in transport and industrial activity. Renewable sources are estimated to have met roughly 80 percent of China’s new electricity demand in 2024, underscoring the scale of the country’s energy transition.

Oil and natural gas now play a relatively small role in China’s power generation mix accounting for roughly 4 percent of electricity production. This stands in sharp contrast to many Asian economies where fossil fuels account for 40–50 percent of electricity generation.

However, China’s energy system is not entirely insulated from geopolitical shocks. Coal remains a dominant component of its energy mix, and the country continues to rely heavily on imported crude for industrial and transport demand.

China’s oil trade relationships also shape its exposure to Middle Eastern disruptions. Iran alone accounts for around 20 percent of China’s oil imports, although analysts say that supply could potentially be replaced by increased shipments from Russia if needed. The more immediate vulnerability lies in the approximately 5 million barrels per day imported from other Middle Eastern producers via the Strait of Hormuz.

Even so, analysts believe the current crisis may reinforce rather than disrupt China’s long-term energy strategy. Policymakers have already prioritised renewable expansion, electrification of transport, and strategic reserve accumulation all measures that reduce exposure to global oil shocks.

China is also expected to continue expanding its crude reserves. Forecasts suggest the country could increase strategic oil stockpiles by about one million barrels per day in 2026, further strengthening its ability to manage supply disruptions.

Recent trade data reflects the geopolitical environment. China’s crude imports declined nearly 2 percent in 2024, but imports surged again as tensions in the Middle East intensified, rising 4.6 percent to a record 580 million metric tons.