Iran’s effective closure of the Strait of Hormuz has become a stress test for China’s energy security policy. Decades of planning now seem to be paying off as Beijing has significant buffers to mitigate the impacts, but it is also exposing sector‑ and region‑specific vulnerabilities.

China’s aggregate exposure – large, but cushioned

Chinese importers are heavily exposed to the Middle East: roughly half of China’s crude imports, one‑third of LNG, 40 percent of naphtha and 45 percent of LPG imports come from the region. Officially China reports no Iranian crude imports, but ship‑tracking data indicate around 0.84 mb/d in 2025, down from 1.2 mb/d in 2024, making Iran a key discounted supplier to certain refiners. Framed against China’s wider energy system, this dependence looks less stark: Middle Eastern crude accounts for about 50 percent of crude imports but only roughly one‑third of total refinery crude runs once domestic output and non‑Middle Eastern grades are counted, and gas remains a small share of overall energy use.

The impact is also cushioned by the fact that Beijing has spent two decades building buffers for such events: it has diversified its crude import sources to keep the Middle East capped at around 50%, built strategic and commercial oil stocks estimated at 110-140 days of imports, and encouraged the electrification of transport, in part in order to gradually reduce its oil demand. In addition, Beijing has been expanding underground gas storage and diversified import corridors via Russian and Central Asian pipelines. More broadly, China’s primary energy mix is anchored in domestic coal and rapidly growing renewables, with oil and gas accounting for less than a third of total energy use. So, in the event of a short‑lived Hormuz disruption, China is more likely to face a price and margin shock than outright physical shortages.

Differentiated impacts

However, the disruption’s impact is highly differentiated across actors, sectors and regions. Independent “teapot” refiners in Shandong are the most exposed to Iranian crude losses, having relied on discounted Iranian barrels to support margins in an increasingly competitive domestic market. The loss of cheap Iranian and changes in Venezuelan crude marketing force these refiners to pay more for alternative crude, including Russian supplies where their bargaining power on discounts has eroded as India and others increase purchases. Other independent plants, and large complexes such as the 0.8 mb/d Rongsheng petrochemical facility and the Sinopec–Saudi Aramco Fujian JV, are vulnerable to reduced Saudi baseload barrels if outages through Hormuz are prolonged. State‑owned refiners can lean more on diversified portfolios and Russian crude, but will still face margin pressure as prices and freight rates rise.

Gas and chemicals emerge as the most underappreciated pressure points. Qatari LNG accounts for about 27 percent of China’s LNG imports, and while this represents only around 6 percent of total gas demand when taking into account domestic supplies and pipeline imports, the global LNG market is structurally tight and few alternatives are available quickly. The price and availability shocks will ripple through the system over the coming months. Oil‑indexed long‑term LNG and pipeline contracts will pass through higher crude prices with a lag, while spiking Asian spot LNG prices make replacing lost cargoes difficult in the near term. Industrial and chemical gas users bear the brunt, especially in coastal provinces that switched from coal to gas to meet air‑quality and carbon‑intensity targets.

The chemicals sector could face a “double whammy” of higher and less secure supplies of naphtha and LPG alongside tighter gas markets, hitting integrated refining‑petrochemical hubs and smaller chemical players in Zhejiang, Jiangsu and Guangdong. Other gas‑using industries such as glass, ceramics and parts of steel are also exposed, although much of heavy industry remains coal‑based or is electrifying, so their primary vulnerability is to broader economic slowdown from higher global energy prices rather than direct fuel shortages. In coastal grids like Guangdong, Jiangsu, Shanghai and Zhejiang, a drawn‑out gas crunch would raise power costs even if outright shortages are unlikely, given the ability to increase coal and renewable generation.

China’s long‑running energy security strategy is being vindicated.

Redundancies in the power system and the central role of coal as the “ballast stone” of energy security allow Beijing to absorb shocks without major blackouts, even if industrial activity and export sectors face higher costs. Authorities and companies are already responding: refiners are cutting runs, gas‑dependent industries are likely to reduce operating rates, and exporters of oil products and chemicals have been instructed to prioritise domestic supply over foreign sales.

In principle, China can also tap sizeable crude and product stocks, but drawing down the strategic petroleum reserve remains operationally and politically complex, as shown by the limited 2021 test release. Gas storage is still below official targets, though it has expanded rapidly, and companies plus local governments face mandates to hold minimum inventories even if oversight is patchy.

In the event of a protracted disruption, Chinese stakeholders will likely draw down stocks, but they will likely opt for commercial inventories rather than coordinate an SPR release with the IEA and other countries.

No “special lane” for Chinese ships

Externally, Beijing has condemned US‑Israeli strikes as illegal while positioning itself as a neutral mediator, dispatching its envoy to the region, but stopping well short of military involvement on Iran’s behalf. It will prioritise diplomacy, risk management and protection of existing assets, knowing that a prolonged conflict threatens both its energy supplies and its broader regional partnerships.

Despite Iranian suggestions that Chinese‑flagged vessels would be allowed to sail, commercial tankers and container ships owned or operated by Chinese companies have largely halted transits, with dozens stranded in Gulf anchorages. That reality undermines the idea that political ties with Tehran can be relied upon to guarantee flows in a crisis and reinforces the need for commercial and logistical risk management, not just diplomacy.

For Chinese buyers and shipowners, this means grappling with the same war‑risk insurance, rerouting and demurrage problems as everyone else. Longer routes, higher premiums and port congestion increase effective landed costs even when alternative supply exists, and the impact is again felt most acutely by smaller refiners, traders and industrial users with weaker balance sheets and less hedging capacity.

Policy and market implications for China

It is becoming clear that even though China is relatively resilient, that does not mean that it is unaffected. While the crisis is unlikely to alter China’s 15th Five‑Year Plan which has just been released, but it reinforces existing priorities: boosting domestic production and stockpiling, diversifying and substituting imports, accelerating renewables and electrification, and keeping coal as backup in a more flexible, shock‑resilient power system.