News Analysis

U.S. and Israeli military strikes on Iran have hit global energy markets, triggering disruptions in shipping and oil supply that could hit China especially hard as the world’s largest oil importer.

Over the past week, tensions around the Strait of Hormuz—a critical gateway for Middle Eastern energy exports and a major chokepoint for global shipping—have pushed oil prices higher, prompted some insurers to withdraw their war-risk coverage, and forced shipowners to reconsider whether it is safe to sail through the Persian Gulf.

Analysts told The Epoch Times that how serious the impact is depends on the duration of the conflict. If tensions ease and shipping routes stabilize, the economic effects may remain limited. But if the conflict drags on—or access to the strait remains restricted—China’s heavy reliance on oil from Persian Gulf producers adds extra pressure to the situation for the country.

The Strait of Hormuz is a thin corridor between Iran and Oman that connects the Persian Gulf to the Indian Ocean. Roughly a fifth of global oil and gas moves through it, making it one of the world’s most important energy chokepoints.

Since the U.S.–Israel strikes, Iran’s Islamic Revolutionary Guard Corps has threatened to attack ships entering the Strait of Hormuz while broadcasting messages to maritime traffic that passage would not be tolerated.

Even without a formal blockade, shipping can grind to a halt if insurers won’t provide coverage. Marine insurers have canceled or sharply tightened war-risk cover for parts of the Gulf, and many ships have chosen to wait outside the strait rather than enter the high-risk zone.

Markets reacted swiftly. Brent crude traded around $92 a barrel on March 6, levels not seen since September 2022, amid fears of a wider conflict in the Middle East.

Freight costs also jumped.

London Stock Exchange Group shipping data shows the benchmark freight rate for Very Large Crude Carriers (VLCCs) from the Middle East Gulf to China jumped to a record $423,736 a day on March 2, up 94 percent from $218,154 on Feb. 27 and more than four times last year’s roughly $100,000-a-day average.

Several major carriers, such as Hapag-Lloyd and MSC, have started suspending transits, delaying sailings, or rerouting vessels serving Persian Gulf ports as security risks rise.

China’s COSCO Shipping Lines, for example, has issued customer advisories warning that services in the Gulf could face restrictions and disruptions tied to the situation.

Why China Is Especially Exposed

China has spent years trying to diversify its energy supplies, but its dependence on Middle Eastern routes remains significant.

Research from Columbia University’s Center on Global Energy Policy estimates that about half of China’s crude oil imports flow through the Strait of Hormuz.

Natural gas shipments face similar exposure. The same Columbia University analysis notes that about a third of China’s liquefied natural gas (LNG) imports come from Qatar and the United Arab Emirates—cargo that typically passes through the strait.

QatarEnergy on March 4 said it halted LNG production and related products after attacks on facilities in Ras Laffan and later declared force majeure on shipments.

Columbia University research has previously estimated that Qatar alone supplies around 28 percent of China’s LNG imports.

Sun Kuo-hsiang, a professor of international affairs at Taiwan’s Nanhua University, told The Epoch Times that any disruption to China’s access to Middle East energy would quickly drive up its energy import costs and put heavy pressure on China’s manufacturing base.

Dependence on Discounted, Sanctioned Oil

The current crisis is also exposing a quieter vulnerability: China’s heavy use of discounted crude from sanctioned countries.

Because of U.S. sanctions on Iran, a large portion of Iranian oil is sold through opaque channels—often involving “shadow” shipping, ship-to-ship transfers, and third-country routing that obscures the origin. China’s customs data has not shown direct Iranian oil imports since 2022, even as tanker tracking indicates the flows continued.

Columbia University’s Center on Global Energy Policy, citing Kpler data, estimated that in 2025 China imported roughly 1.38 million barrels per day of Iranian crude, as well as 389,000 from Venezuela and at least 800,000 from Russia.

Based on China’s record 11.6 million barrels per day in total crude imports in 2025, Iranian barrels would amount to roughly 12 percent of the total.

The draw is price. U.S.-based China affairs analyst Wang He told The Epoch Times that oil from sanctioned countries often sells at deep discounts compared to global benchmarks because of the legal and logistical risks.

He said sanctions and the “shadow fleet” can push discounts even further while also driving up shipping costs—meaning buyers push harder for lower prices while middlemen charge for the risk.

That discount matters most for China’s “teapot refineries”—small, independent refiners concentrated largely in Shandong province, Wang said. These plants are major buyers of discounted crude and together account for roughly a quarter of China’s refining capacity.

“Official Chinese data shows Venezuela making up less than 1 percent of China’s oil imports, and Iran doesn’t even appear among the top 10 suppliers,” Wang said. “But Western estimates suggest Iranian crude may actually account for roughly 12 to 13 percent of China’s imports, much of it moving through smuggling networks and ‘shadow’ trade channels.”

He said that the lack of transparency itself creates policy risks for the Chinese regime.

“The credibility of the data directly affects how accurately the situation can be assessed and how policies are formulated,” he said.

Economy Under Pressure

Wang said higher energy prices would add strain to an economy that is already struggling to generate pricing power.

China’s producer price index (PPI)—a key gauge of factory-gate prices—was still falling year over year at the start of 2026, according to China’s National Bureau of Statistics.

“If rising oil prices are transmitted into the domestic economy, they could bring imported inflation and potentially help China emerge from deflation—but it’s a double-edged sword,” Wang said.

Sun estimated that a disruption in Iran-related supply could leave China facing a short-term gap of about 1.3 million barrels per day, pushing China’s delivered oil import costs up 20 to 30 percent.

He said China could try to replace some of those barrels with more from Russia, Brazil, Iraq, and Canada, but warned those supplies would generally cost more and travel farther—shrinking China’s cushion if the crisis drags on.

Sun also said a prolonged spike in oil prices, on top of China’s property downturn and weak domestic demand, could create stagflationary conditions. “China’s CPI could rise to 0.5 to 1 percent, while GDP growth might fall below 4.5 percent under those conditions,” he said.

Qiu Wanjun, a finance professor at Northeastern University in Boston, told The Epoch Times that China has long relied on discounted oil from sanctioned countries—such as Iran, Venezuela, and Russia—to help keep its export-oriented manufacturing competitive.

He said if oil prices surge and shipping through the Strait of Hormuz remains severely constrained for an extended period, China could face heavier stagflation pressure.

Qiu described a familiar chain reaction: higher oil prices raise logistics costs, which can push up the price of delivery services, shipping, and retail goods. Higher energy costs can also make fertilizers, farm machinery, and cold-chain transport more expensive—costs that often show up later in food prices.

Meanwhile, tighter margins in manufacturing and shipping can lead to hiring freezes or layoffs, Qiu said.

Xie Tian, a professor at the Aiken School of Business at the University of South Carolina, said low-income workers, farmers, and gig workers such as food delivery riders would be among the most exposed.

“If the conflict drags on, broader price increases could follow, putting pressure on both Chinese businesses and households,” Xie told The Epoch Times.

Limited Room to Maneuver

Wang said Beijing has options—strategic stockpiles, administrative controls, and some flexibility to redirect imports—but there is no quick fix if the Strait of Hormuz stays highly risky for shippers.

Even producers in the region have limited ways to bypass the strait. U.S. Energy Information Administration analysis notes that Saudi Arabia and the UAE operate pipelines that can move some crude outside Hormuz, but their combined bypass capacity is only a fraction of what normally transits the strait.

The crisis also highlights the geopolitical risks in Beijing’s Middle East strategy, Wang added.

China and Iran signed a 25-year Comprehensive Strategic Partnership agreement in 2021, with reported Chinese investments of up to $400 billion over 25 years, much of it tied to energy cooperation—including long-term access to discounted oil—though the full terms of the deal have not been publicly disclosed.

Wang said that if the conflict drags on, Chinese projects in Iran could face suspension, damage, or total loss.

On the U.S. side, Washington has been signaling it wants to keep energy trade moving.

President Donald Trump said on March 3 that the United States would offer government-backed insurance and financial guarantees for maritime trade in the Gulf, and suggested the U.S. Navy could escort tankers if needed.

Cheng Mulan and Yi Ru contributed to this report.