China's Energy Security at Risk Amid Israel-Iran Tensions

As hostilities between Israel and Iran intensify, China's strategic partnership with Iran faces significant challenges, threatening Beijing's energy security and regional influence.

China's reliance on Iranian crude oil, which constitutes a substantial portion of its imports, is jeopardized by the escalating conflict. The potential disruption of the Strait of Hormuz, a critical maritime route, further exacerbates concerns over energy supply stability. This situation underscores the delicate balance China must maintain between its economic interests and diplomatic relations in the Middle East.

China's Energy Dependence on Iranian Oil

Iran has been a key supplier of crude oil to China, with exports reaching approximately 1.7 million barrels per day in May 2025. This volume accounted for a significant share of China's total oil imports, highlighting the importance of Iranian crude in meeting the country's energy demands.

Impact of the Conflict on Oil Imports

The recent escalation in Israel-Iran tensions has led to volatility in global oil markets. Brent crude oil prices have risen sharply, with analysts projecting that if hostilities disrupt 1.1 million barrels per day of Iranian oil exports, prices could increase to $75-$78 per barrel, representing a 15%-20% rise from the pre-conflict level of $65 per barrel in May. A prolonged disruption could push prices even higher, potentially reaching $90 per barrel.

Iran's Strategies to Maintain Oil Exports

In response to these challenges, Iran has employed several strategies to sustain its oil exports:

• Utilization of the "Ghost Fleet": Iran has increasingly relied on a fleet of tankers operating without transponders, known as the "ghost fleet," to transport oil clandestinely. These vessels often engage in ship-to-ship transfers to disguise the oil's origin.

• Optimized Loading Operations: Iran has streamlined its oil loading processes by using a single jetty on the eastern side of Kharg Island, allowing large tankers to load sequentially. This method has enabled Iran to achieve a five-week high in crude oil loadings at 2.2 million barrels per day, despite ongoing conflicts.

• Strategic Relocation of Floating Storage: To mitigate potential disruptions, Iran has moved a significant portion of its floating storage fleet closer to China. Approximately 8 million barrels are now anchored offshore of China, ensuring continued availability to Chinese buyers amid geopolitical instability.

China's Diplomatic Response

China has responded to the escalating conflict with calls for de-escalation and diplomacy. President Xi Jinping emphasized that instability in the Middle East threatens global peace and urged Israel to cease hostilities to prevent further regional spillover. In communications with Russian President Vladimir Putin, both leaders condemned Israel’s actions and proposed mediation efforts. However, Israel and its allies have shown little interest in China as a neutral arbiter due to its close ties with Iran.

Despite condemning Israel, China has maintained its historical policy of non-interference, offering only rhetorical support to Iran without providing military aid. China’s economic interests in the Middle East, particularly in oil imports—40% of which come from the region—make regional stability a key priority. The conflict threatens China's trade and investments, especially if it expands or disrupts oil trade through the Strait of Hormuz.

Economic Implications

The conflict has led to volatility in global oil markets. Analysts project that if hostilities disrupt 1.1 million barrels per day of Iranian oil exports, Brent crude oil prices could rise to $75-$78 per barrel, representing a 15%-20% increase from the pre-conflict level of $65 per barrel in May. A prolonged 3 million barrels per day disruption could push prices to $90, while a closure of the Strait of Hormuz could result in a spike to $120-$130.

Conclusion

The escalating Israel-Iran conflict presents significant challenges to China's energy security and regional influence. As tensions continue, China must navigate a complex landscape to safeguard its economic interests and maintain stability in the Middle East.