The Oil Shock and the Unequal Burden

The war in Iran has exposed something energy economists have been noting for years: not all oil importers are equally vulnerable, and the gap between them is widening. As the Strait of Hormuz — through which roughly 31% of the world's seaborne oil ordinarily passes — has slowed to a near standstill, the consequences are being distributed unevenly across Asia, Europe, and beyond.¹

The most immediate pressure is falling on Asia's mid-sized importers. Taiwan sourced more than 30%  of its liquid natural gas (LNG) consumption from Qatar in 2025, South Korea sourced 15%, and Japan sourced 5%. Most of that LNG moves through the Strait, and with shipping effectively halted, these countries are competing for spot cargoes on an already tight market. Asian LNG benchmark prices have more than doubled since the war began, and gas carriers sailing toward Europe have rerouted toward Asia to capture the premium. For utilities in Seoul and Tokyo facing summer air-conditioning demand, the urgency is real.²

Europe is not insulated. Gas prices reached €69.50 per megawatt hour this week, more than double pre-war levels, as Asian and European buyers competed for the same limited pool of available LNG.² The comparison to 2022, when Russian pipeline gas was cut following the invasion of Ukraine, is unavoidable. European buyers have since introduced tougher contract clauses to penalise cargo diversions, and there is more unallocated US LNG on the market than four years ago.² These are genuine buffers, but the longer the Strait remains closed, the greater the risk that disruption becomes a genuine shortage rather than a price shock.²

Oil markets have reflected this uncertainty sharply. Brent crude surged to US119 a barrel last Monday — the biggest intraday swing in dollar terms on record — before falling back on reports of emergency reserve releases.³ The spread between buying and selling prices, normally a few cents a barrel, widened to as much as US10 at peak volatility, as traders struggled to price contracts against a conflict with no clear timeline.³

Against this backdrop, China's position is notably different. It is the world's largest crude importer – buying nearly twice as much as the United States – yet OCBC analysts assess it as "less sensitive to a prolonged closure of the Strait of Hormuz than many of its Asian peers."¹ China holds an estimated 1.2 billion barrels of onshore crude stockpiles, roughly sufficient for three to four months of supply.¹ New overland pipelines have reduced the Strait's share of its seaborne oil imports to around 40-50%, and oil shipments through the route account for only 6.6% of China's total energy consumption.¹

The more durable advantage lies in China's energy transition. Renewables accounted for 1.2% of China's total energy consumption in 2023, up from 0.2% two decades earlier, ahead of both the US and India at 0.2% each.¹ More than half of new passenger vehicles sold are now new-energy vehicles, and EV adoption in trucks has displaced over one million barrels per day of implied oil demand.¹ Oil and gas make up just 4% of China's power mix, against 40-50% across many other Asian economies.¹ China aims to raise non-fossil fuels to 25% of total energy consumption by 2030, from 21.7% in 2025.¹

China is not unaffected. Iran accounted for around 20% of its oil imports, though analysts believe much of that volume can be replaced by Russian supply.¹ The larger exposure is the roughly five million barrels per day imported from other Middle Eastern producers through the Strait.¹ China thus remains "materially exposed,” but more flexible.¹

The energy shock from the Iran war has made the strategic logic of China's two-decade transition more legible than any policy paper could. Whether other governments draw the appropriate conclusions is thus a separate question.

Sources

¹ Cheng, Evelyn, Sam Meredith, Ying Shan Lee and Penny Chen. “Why China Can Withstand Oil’s Surge Past $100 More Easily Than Other Countries.” CNBC, 9 March 2026.

² Financial Times. “Asian and European Buyers Battle for LNG as Hormuz Closure Chokes Supplies.” Financial Times, March 2026.

³ Financial Times. “Oil Markets Record Biggest Intraday Swing as Iran War Drives Brent to $119.” Financial Times, March 2026.