Geopolitical tensions involving Iran have increased the risk of disruption to the strategic shipping route of the Strait of Hormuz, which has long been one of the world’s most important oil transportation corridors. However, China appears to be an exception in this situation.

The surge in tensions has pushed global oil prices sharply higher and at one point even drove them past the psychological level of US$100 per barrel. Such a situation poses a threat to the economies of energy-importing countries.

Unlike many other nations, however, several analysts believe China could be relatively more resilient to rising oil prices compared with other countries in Asia.

Below are several factors considered to make China’s economy better prepared to face potential shocks in global oil prices.

1. Large Strategic Oil Reserves

One of the main reasons China is more resilient to oil price volatility is the massive size of its strategic petroleum reserves.

Over the past few years, the Chinese government has aggressively expanded its Strategic Petroleum Reserve (SPR) as a precautionary measure against disruptions in global energy supply.

These reserves serve as a buffer in the event of price spikes or disruptions in global oil distribution, allowing China to withstand short-term supply pressure without immediately increasing imports when prices are high.

China has accumulated one of the largest strategic and commercial crude oil stockpiles in the world and was estimated to hold about 1.2 billion barrels of onshore crude oil reserves as of January 2025.

This amount is equivalent to roughly three to four months of supply, which could delay the economic impact of potential supply disruptions.

“For the past 20 years, China has been trying to reduce its dependence on maritime oil shipping routes,” said Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, as cited by CNBC International.

He added that the development of new land-based oil pipelines and diversification into renewable energy sources has reduced China’s reliance on the Strait of Hormuz to about 40% to 50% of its seaborne oil imports.

The Strait of Hormuz connects the Persian Gulf to the Arabian Sea and global shipping lanes. It is a narrow passage with Iran to the north and Oman and the United Arab Emirates to the south.

Around 31% of global seaborne oil flows passed through the Strait of Hormuz last year, equivalent to about 13 million barrels per day.

However, oil shipments through this route account for only about 6.6% of China’s total energy consumption, according to Ting Lu, chief China economist at Nomura.

Meanwhile, natural gas imports passing through the same route contribute only about 0.6% of China’s energy consumption.

This shift reflects two decades of strategic transformation in China’s energy system, giving the country a unique position in the global energy market.

2. Energy Transition Reduces Oil Dependence

Another factor strengthening China’s position is the rapid energy transition currently taking place within the country.

By 2030, China aims to increase the share of non-fossil energy to 25% of its total energy consumption, up from 21.7% in 2025.

China is currently one of the world’s largest investors in renewable energy sectors such as solar, wind, and nuclear power. In addition, the adoption of electric vehicles (EVs) in China has grown rapidly.

As a result, oil consumption growth in China is no longer as fast as before. This condition makes the Chinese economy relatively more resilient to global oil price shocks since it is becoming less dependent on fossil fuels.

While the United States has increased its domestic oil production over the past decade, China has been rapidly diversifying its energy sources.

Renewable energy—excluding nuclear and hydropower—accounted for about 1.2% of China’s total energy consumption in 2023, up from only around 0.2% two decades earlier, according to CNBC calculations based on International Energy Agency (IEA) data.

By comparison, India and the United States recorded much lower shares of renewable energy in 2023, each at around 0.2%.

Although the figure remains relatively small for now, the growing share of renewable energy in China’s energy mix has significant global implications.

China’s strong push toward electric vehicles, especially in the trucking sector, has replaced oil demand of more than 1 million barrels per day, according to a Rhodium Group report in July 2025.

The research firm estimates that this figure will increase by approximately 600,000 barrels per day over the following 12 months.

Currently, more than half of all newly sold passenger vehicles in China are New Energy Vehicles (NEVs), which rely more on batteries than gasoline.

“With transport fuel demand already showing signs of peaking and renewable energy capacity expanding rapidly, China’s sensitivity to oil price fluctuations is declining year by year,” analysts from OCBC wrote.

The strengthening electrification of transportation and the expansion of renewable-based power generation will increasingly shield the economy from oil-related shocks in the long term.

Oil and natural gas currently account for only about 4% of China’s power generation mix, far lower than the roughly 40% to 50% commonly seen in many other Asian countries.

Renewable energy contributed about 80% of additional electricity demand growth in China in 2024.

Meanwhile, electricity—mostly generated from coal and increasingly from renewable sources—now represents a growing share of China’s total energy consumption, according to energy research group Ember.

3. Diversification of Energy Supply Sources

In addition to expanding reserves and accelerating energy transition, China has also diversified its energy supply sources.

In recent years, China has increased energy imports from various regions such as Russia, Africa, and Latin America. This diversification reduces dependence on a single supplier region.

U.S. sanctions on Iran have also made China one of the few buyers still purchasing Iranian oil.

Iran accounts for around 20% of China’s oil imports, although much of this volume could theoretically be replaced by increased imports from Russia, said Ano Kuhanathan, Head of Corporate Research at Allianz Trade.

The greater risk instead comes from around 5 million barrels per day of oil that China imports from other Middle Eastern countries through the Strait of Hormuz, Kuhanathan added.

Iran Oil Exports by Country

“Shocks such as the Iran war will likely reinforce China’s existing energy policy direction rather than change it,” said Muyi Yang, senior Asia energy analyst at Ember.

“This situation highlights the risks of heavy dependence on imported oil and gas. Therefore, energy transition is not only about building more wind and solar power plants but also about decarbonizing the entire economy,” he added.

However, the transition will not happen easily. China’s fossil fuel industry is dominated by state-owned enterprises, which typically move more slowly than private sector companies.

China is also expected to continue expanding its crude oil reserves.

The U.S. Energy Information Administration (EIA) stated in February that China is projected to add around 1 million barrels per day to its strategic reserves in 2026.

China’s crude oil imports fell by nearly 2% in 2024 according to Wind Information. However, when tensions in the Middle East began to escalate last year, China’s oil imports actually increased by 4.6% to reach a record of about 580 million metric tons.

“China is indeed exposed to this risk, but it also has greater flexibility,” said Go Katayama, principal insight analyst at Kpler.

Major Oil Suppliers to China

With a combination of large strategic reserves, a rapid energy transition, and increasingly diversified supply sources, China is considered to be in a relatively stronger position to withstand potential global oil market shocks caused by conflicts in the Middle East.