Oil and gas prices have jumped since the United States and Israel struck Iran last weekend, jolting energy markets that had grown complacent about Middle East risk. U.S. gasoline prices are surging, forcing the White House to weigh how to blunt the political fallout. Europe, just emerging from the shock of Russia’s invasion of Ukraine, faces another potential squeeze, with natural gas prices at their highest level since 2023.
China, as the world’s largest oil and LNG importer, would seem the most exposed, and the most likely to be hurt by this shock. Indeed, Beijing has already ordered refiners to curb fuel exports to protect domestic supplies. But it would be a mistake to assume, as many observers have, that China will be the war’s big loser. Crises often reorder energy geopolitics in unexpected ways. This one may ultimately strengthen, rather than weaken, China’s strategic position.
Oil and gas prices have jumped since the United States and Israel struck Iran last weekend, jolting energy markets that had grown complacent about Middle East risk. U.S. gasoline prices are surging, forcing the White House to weigh how to blunt the political fallout. Europe, just emerging from the shock of Russia’s invasion of Ukraine, faces another potential squeeze, with natural gas prices at their highest level since 2023.
China, as the world’s largest oil and LNG importer, would seem the most exposed, and the most likely to be hurt by this shock. Indeed, Beijing has already ordered refiners to curb fuel exports to protect domestic supplies. But it would be a mistake to assume, as many observers have, that China will be the war’s big loser. Crises often reorder energy geopolitics in unexpected ways. This one may ultimately strengthen, rather than weaken, China’s strategic position.
Within the first week of war, oil prices rose more than 25 percent and could surge into triple digits if the Strait of Hormuz—through which roughly one-fifth of the world’s oil passes—remains largely closed to tanker traffic. U.S. gasoline prices are now at their highest level of either of President Donald Trump’s terms and are likely to climb further. And this spike has come even though most major production facilities in the Persian Gulf remain intact. Thankfully, both sides appear worried that direct attacks on energy infrastructure would invite retaliation against their own vital assets.
So far, the disruption has been driven less by physical damage than by logistics and fear. Tankers are avoiding the strait, insurers are raising rates, and producers—particularly Iraq—have begun shutting in output as storage fills without access to export routes.
Natural gas markets have been hit harder still. After an Iranian drone struck Ras Laffan, the Qatari complex that houses the world’s largest liquefied natural gas (LNG) export facility, Doha suspended operations. Qatar supplies roughly 20 percent of globally traded LNG, sending shockwaves through already tight markets.
China appears highly vulnerable. Roughly half of its crude imports and a third of its LNG imports transit the Strait of Hormuz. With so much at stake, China’s foreign ministry quickly called for an end to hostilities and for all parties to ensure safe passage through the strait. This is why some analysts have cast Beijing as the likely “big loser” of Trump’s strike on Iran.
Yet over the longer term, there are at least three reasons China may emerge as a surprising beneficiary.
First, for more than two decades Beijing has pursued an energy security strategy designed precisely for moments like this. At its core is electrification: shifting more of the economy away from direct oil and gas consumption and thereby reducing exposure to volatile oil and gas markets prone to geopolitical disruption.
More than 30 percent of China’s final energy consumption now comes from electricity, compared with just over 20 percent globally. More than half of the cars sold in China are electric, the result of deliberate policies aimed as much at energy security as emissions reduction. The International Energy Agency estimates China has avoided 1.2 million barrels per day of oil demand growth since 2019 and now projects Chinese oil demand will peak in 2027, two years earlier than previously expected.
Beijing has also worked to generate as much of its electricity as possible from domestic sources. Coal and renewables dominate the power mix, while nearly all electricity demand growth in 2024 was met by clean sources, led by solar and wind. Half of all nuclear reactors under construction worldwide are in China. Although the country imports natural gas, only a modest share is used for power generation. In the event of prolonged LNG disruptions, China can lean more heavily on domestic sources of energy such as coal to bridge the gap.
China would still feel the sting of a global oil shock, of course. But its push to become an electrostate—rather than doubling down on crude production—has reduced its exposure. The United States may be the world’s largest oil producer and a major net exporter, yet because oil is priced globally, American consumers feel the pain at the pump just the same. The most durable hedge against oil shocks is to consume less oil, not merely to produce more.
China has also built buffers. According to Kayrros, it holds roughly 1.4 billion barrels in strategic and commercial storage, which provides China with 120 days of import coverage at the 2025 level. By contrast, the U.S. Strategic Petroleum Reserve is about 40 percent smaller than it was a decade ago. Convinced that the shale revolution had delivered energy independence, Congress sold significant volumes to fund unrelated spending. The Biden administration later released some 200 million barrels after Russia’s invasion of Ukraine to curb gasoline prices, even though Russian exports ultimately proved resilient.
Second, the crisis may shift how other countries weigh energy security trade-offs.
In a world where energy is increasingly weaponized, many importers seek to reduce exposure to volatile oil and gas markets by electrifying. Yet electrification introduces a different vulnerability: dependence on China for clean energy technologies.
China’s electrification drive has been paired with a concerted push to dominate clean energy supply chains. It accounts for more than 80 percent of global solar manufacturing, wind turbines, and battery production capacity and processes the vast majority of critical minerals essential to these technologies. Rapidly expanding grids or deploying large volumes of solar, wind, and storage is exceedingly difficult without deepening reliance on Chinese firms and materials.
That reality has tempered ambition elsewhere. Europe, for example, aspires to become an electrostate for both climate and security reasons. Yet as our colleagues Anne-Sophie Corbeau and Tatiana Mitrova have explained, European leaders hesitate to exchange reliance on imported hydrocarbons for dependence on Chinese clean-tech supply chains.
This conflict may partially shift that calculation. Dependence on China carries risk. But the reliability of traditional hydrocarbon suppliers appears less certain than it did a few years ago. Europe’s decades-long trust in Russia as a reliable energy supplier is shattered. LNG from the United States has filled much of the gap, yet concerns are quietly growing in Europe about the reliability of U.S. LNG exports. Europeans now fear that these could become entangled in domestic politics—whether Washington seeks to use them as a form of economic coercion or restricts exports in response to price spikes at home.
Now even the Persian Gulf, long an anchor of global supply reliability, looks more vulnerable. For decades Gulf producers were exceptionally reliable. Qatar had never suspended LNG exports until this week. Saudi Arabia restored output with striking speed after the 2019 attack on the Abqaiq facility, demonstrating the durability of its infrastructure. Even now, Saudi Aramco is rerouting supplies via pipeline to the Red Sea to meet contractual obligations, underscoring the system’s remarkable flexibility under strain.
For years, closure of the Strait of Hormuz was the nightmare scenario that never materialized. Yet if the strait remains largely closed to tanker traffic, importing countries may begin to reassess a risk long treated as theoretical. In that context, reliance on China for electrification components and clean technology may appear less like a strategic liability and more like a manageable trade-off.
Third, more broadly, by instigating this crisis without consulting its allies, Washington risks reinforcing the perception that the United States is today’s biggest source of geopolitical volatility. China, by contrast, is seeking to present itself as a steadier commercial partner. The result will be a growing tendency to hedge among traditional U.S. allies. Canada’s decision to ease restrictions on a limited number of Chinese EVs and European leaders’ visits to Beijing to deepen clean energy cooperation reflect this.
China has powerful incentives to cultivate these emerging ties. Clean energy industries—solar, batteries, and EVs—accounted for more than 11 percent of China’s GDP in 2025 and over a third of its growth. If treated as a standalone economy, this sector would rank among the world’s largest. Sustaining that expansion requires foreign demand. As energy security concerns intensify, Chinese clean technologies may appear increasingly attractive.
The immediate shock of this crisis exposes China’s dependence on Middle Eastern oil and gas. But it also underscores how deliberately Beijing has sought to prepare for a world in which energy security is inseparable from geopolitics—by electrifying its economy, securing domestic sources of energy, amassing stockpiles, and dominating clean technology supply chains.
The implications may become obvious soon. As Trump and Chinese President Xi Jinping prepare to meet, Washington is reportedly considering urging Beijing to redirect oil purchases away from Russia and toward U.S. crude—an effort to wield traditional hydrocarbon leverage at a moment of market stress. Yet China has spent years trying to gradually reduce its structural exposure to precisely such pressure, as well as to the very vulnerabilities that are now rattling markets.
If confidence in global oil and gas trade routes continues to erode while electrification accelerates, this crisis may be remembered as a pivotal moment in the shift toward an electrostate era. And in this new era, China arrives at the bargaining table with a serious and growing advantage.
