The 2026 Iran war and subsequent closure of the Strait of Hormuz was yet another harsh wake-up call to the entire world about the dangers of foreign reliance for energy supplies. Yet throughout the height of the crisis, China, the world’s largest crude oil importer, appeared relatively immune to the blow.
Has the Asian powerhouse truly reached a level of unmatched energy resilience, or were the cracks inevitably about to show like the rest of the world?
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In this episode, we break down China’s management of recent oil flow disruptions and its march towards energy independence. Joining us to share their insights are Rory Green, head of emerging markets research at TS Lombard (TSL) and author of TSL’s recent report ‘Is China immune to energy shocks?’, and Erica Downs, senior research scholar at the Center on Global Energy Policy at Columbia University in the US, who specialises in Chinese energy markets and geopolitics.
China’s resilience to energy shocks and remaining risks
In his recent report, Green argues that Beijing has spent well over a decade preparing for a moment like this – a major disruption in global oil flow.
He explains: “There are four main buffers that China has built up, some deliberately, others less so… the stockpile of commodities, the huge capacity in petrochemicals, low inflation, and the big electrification and energy build-out. Those four combined make China very resilient to this energy shock.”
Downs frames these moves as part of a long-standing national ambition to become an “energy powerhouse”, which involves not only increasing the share of non-fossil energy in the mix but also being able to independently manufacture various energy technologies.
“The conflict in the Gulf has simply underscored that the best way to ensure China’s energy security is to source as much energy as it can from home,” she comments. “That means using more renewable energy because China is limited in its oil and natural gas resources. Coal is also part of the story, but China does have plans to peak coal consumption by 2030.”
Still, both experts say China’s shield is not yet entirely airtight. The country remains heavily dependent on imported crude and gas, and oil remains hard to displace in certain industries including aviation, legacy vehicle fleets and petrochemical feedstocks.
China’s oil stockpiles: how effective?
The discussion drills into one of China’s most-cited safeguards: the strategic petroleum reserve (SPR) and commercial inventories.
Green argues that stockpiles buy time but not indefinitely. If the Strait of Hormuz stays shut for a prolonged period, he says China’s reserves could begin to bite, creating domestic stress and potentially forcing Beijing back into the global market at the wrong moment.
“We reckon there is probably another two months of reserves of raw material and refined products before China is very seriously impacted,” he says.
However, he also notes that it is difficult to assess how much of China’s resilience comes from its stockpiles, mainly because the SPR largely remains a “state secret”. Instead, outsiders are left piecing together signals from satellite imagery and macroeconomic outcomes.
“But if we take the overall response of the economy to the recent energy shock, I can say it has been undeniably very impressive.”
Absorbing shock to causing shock: China’s response in a worse-case scenario
China’s response to geopolitical events can either dampen global market volatility or amplify it. Green explains that, so far, China’s reduced imports throughout the recent crisis have acted like a pressure valve for the global market. By drawing down inventories and leaning on its buffers, the nation avoided driving prices into extreme territory.
“China’s oil imports have dropped roughly 50% since pre-Iran conflict, and that is helping out the world. If oil imports had remained constant through the conflict, we could easily see oil at close to $200 a barrel.”
As of now, Green believes that China is sticking to its approach of slowing purchases when prices spike, then “buying the dip” as they fall when the Strait of Hormuz reopens, which authorities expect to happen sooner rather than later.
However, if the strait closure lasts for longer than another two months and China’s reserves start running low, we could see the country’s oil imports spike.
This risk depends on expectations. If Chinese authorities believe the disruption will exceed its buffer window, China’s response function could flip fast, returning to the market aggressively to refill its stockpiles, thereby pushing prices higher.
Russia: a buffer or another vulnerability?
The conversation turns to Russia’s role as both a safety net and long-term dilemma for China.
Downs argues that the conflict in the Middle East validated Beijing’s long-running effort to develop overland energy supply lines, especially with Russia, with overland flows of crude oil, pipeline gas and liquefied natural gas reducing exposure to maritime chokepoints.
At the same time, she stresses that China is wary of replacing one geopolitical vulnerability for another. She flags that Russian President Vladimir Putin’s recent visit to Beijing served as a revealing signal. Despite the Middle East conflict arguably strengthening Russia’s leverage, “I found it quite striking… that we didn’t see any announcement regarding the proposed Power of Siberia 2 natural gas pipeline”, she says, suggesting China may have concluded that the better lesson is to move away from imports overall.
Downs also clarifies that not all Chinese buyers behave strategically on a national level; some buyers “aren’t really thinking about how dependent China is on Russia” and are instead simply price-driven, relying on discounted sanctioned crude. This nuance points to a complex picture in which China as a whole may not be able to phase out Russian imports as quickly as the nation hopes.
Lessons from the Iran war
Recent geopolitical catalysts – the trade wars, the pandemic, the Russia-Ukraine war and now the Iran war – have forced nations across the world to rethink their energy agendas. China is no exception.
Downs argues that these events have reinforced China’s commitment to energy self-sufficiency – but she cautions that system transformation “doesn’t happen overnight” and must be executed carefully.
Green’s takeaway from the Iran war is that Chinese President Xi Jinping will likely feel vindicated in having built out buffers, whether that be oil reserves or domestic energy sources, but that each new disruption will accelerate Beijing’s push for energy self-sufficiency.
As for immediate next steps, he anticipates rebuilding stockpiles once the Strait of Hormuz reopens, continued investment in domestic technology and supply chain capabilities, as well as a renewed push to reduce financial exposure via RMB (renminbi) internationalisation.
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