Iran Crisis: How China May Benefit From Shifting Energy Geopolitics

Oil and gas prices have surged following the recent U.S.-Israeli strikes on Iran, jolting energy markets and raising concerns about potential disruptions to global supply. While initial reactions focused on the immediate impact on Western economies, a less-discussed consequence could be the strengthening of China’s strategic position in the energy landscape. Beijing, the world’s largest oil and LNG importer, appears surprisingly well-positioned to navigate this crisis, potentially emerging as a beneficiary as the geopolitical order shifts. The situation is further complicated by the recent death of Iranian Supreme Leader Ayatollah Ali Khamenei on March 1, 2026, adding another layer of uncertainty to the region.

A Complex Web of Interests

The immediate fallout of the attacks has been a spike in energy prices. U.S. Gasoline prices are at their highest levels during either of Donald Trump’s terms, and European natural gas prices have climbed to levels not seen since 2023, according to Bloomberg. Qatar’s suspension of operations at Ras Laffan, a major LNG export facility following an Iranian drone strike, has exacerbated the situation, as Qatar supplies roughly 20 percent of globally traded LNG. China, heavily reliant on Middle Eastern energy supplies – roughly half of its crude imports and a third of its LNG imports transit the Strait of Hormuz – initially responded by ordering its refiners to curb fuel exports to protect domestic supplies. However, framing China as a simple “loser” in this scenario overlooks a longer-term strategy of energy security that may allow it to capitalize on the disruption.

Decades in the Making: China’s Energy Security Strategy

For over two decades, China has pursued a deliberate energy security strategy designed to mitigate the risks of geopolitical instability. At the core of this strategy is a significant push towards electrification, reducing direct reliance on oil and gas. Currently, more than 30 percent of China’s final energy consumption comes from electricity, compared to a global average of just over 20 percent. This transition is further fueled by the rapid adoption of electric vehicles. over half of all cars sold in China are now electric, driven by policies prioritizing energy security alongside emissions reduction. The International Energy Agency estimates that 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.

Beyond electrification, China has focused on bolstering domestic energy production. Coal and renewables dominate its power mix, and nearly all electricity demand growth in 2024 was met by clean sources, led by solar and wind. The country is also aggressively expanding its nuclear capacity, with half of all nuclear reactors under construction worldwide located in China. While China still imports natural gas, its use for power generation remains modest, allowing it to lean more heavily on domestic sources during potential LNG disruptions.

Strategic Stockpiles and Supply Chain Dominance

China has also proactively built substantial energy stockpiles. As of March 2, 2026, Kayrros estimates China holds roughly 1.4 billion barrels in strategic and commercial storage, providing 120 days of import coverage at 2025 levels. This contrasts sharply with the U.S. Strategic Petroleum Reserve, which is approximately 40 percent smaller than it was a decade ago, a consequence of previous decisions to prioritize funding for other initiatives.

However, China’s advantage extends beyond stockpiles and domestic production. It has also achieved a dominant position in the supply chains for clean energy technologies. China accounts for over 80 percent of global manufacturing capacity for solar panels, wind turbines, and batteries, and processes the vast majority of critical minerals essential to these technologies. This dominance presents a complex dynamic for other nations striving for energy independence, as reducing reliance on hydrocarbons may inadvertently increase dependence on Chinese supply chains.

A Shifting Global Calculus

The current crisis may force a reassessment of energy security trade-offs among importing nations. Europe, for example, aspires to become an electrostate for both climate and security reasons, but hesitates to fully embrace reliance on Chinese clean-tech supply chains. The perceived unreliability of traditional hydrocarbon suppliers, exemplified by Russia’s actions in Ukraine and now the instability in the Persian Gulf, may shift this calculation. Qatar’s unprecedented suspension of LNG exports, and Saudi Arabia’s rerouting of supplies via pipeline to meet contractual obligations, underscore the vulnerability of even historically reliable suppliers.

the perception of the United States as a source of geopolitical volatility, particularly following the strikes on Iran without extensive consultation with allies, could encourage hedging behavior among traditional U.S. Partners. Canada’s recent easing of restrictions on Chinese electric vehicle imports and European leaders’ visits to Beijing to deepen clean energy cooperation are indicative of this trend. China, in turn, is actively cultivating these relationships, as clean energy industries accounted for over 11 percent of its GDP in 2025 and a third of its economic growth.

Russia’s Position and the Iran-China Relationship

The situation is further complicated by Russia’s role in the region. According to AP News, Russia has maintained friendly relations with both Iran and Israel, a balancing act that has angered some Iranian leaders. Following Russia’s invasion of Ukraine in February 2022, Iran provided Russia with Shahed drones and later licensed their production within Russia. The recent escalation in the Iran-Israel conflict, coupled with the death of Ayatollah Ali Khamenei, may alter this dynamic, potentially pushing Iran closer to Russia as it seeks support against Western pressure. Hanna Notte, an expert on Russian-Iran ties, suggests that the attacks may even “harden” Putin’s position in Ukraine.

What to Expect in the Coming Months

The immediate future will likely be characterized by continued volatility in energy markets and heightened geopolitical tensions. The extent of disruption to oil and gas flows will depend on the duration and intensity of the conflict, as well as the effectiveness of diplomatic efforts to de-escalate the situation. China is likely to continue its strategy of prioritizing domestic energy production, expanding its stockpiles, and strengthening its position in clean energy supply chains. The upcoming meeting between Donald Trump and Xi Jinping will be a crucial opportunity for Washington to attempt to influence Beijing’s energy policies, potentially urging it to redirect oil purchases away from Russia. However, given China’s long-term strategic goals, such efforts may face significant resistance.

the crisis in the Middle East may serve as a catalyst for a broader restructuring of the global energy order, accelerating the transition towards a more diversified and electrified energy system. In this evolving landscape, China appears poised to emerge not as a loser, but as a key player, potentially consolidating its energy dominance and expanding its geopolitical influence.