🇨🇳🛢 The Strait of Hormuz crisis shows Beijing is now a stabilizing force for oil prices. This potentially reshapes the energy risk premia — and Asian geopolitics if conflict breaks out over Taiwan.

Saudi Arabia is known as the “swing exporter” in the oil market because it can either pump out more or less of the black stuff in response to shocks. Historically the kingdom hasn’t had a match on the demand side. Barring a major economic crisis, consuming nations have always kept their purchases steady. Not anymore. After the Iran war, China has emerged as the world’s first oil “swing importer.”

The ramifications of China becoming a stabilizing force for commodity prices go way beyond the latest Middle East conflict. This potentially reshapes the energy market — and Asian geopolitics. If the 1973 supply shock minted the term “Arab oil weapon,” the 2026 US-Israeli war on Iran now gives us the “Chinese oil weapon.” Or maybe “shield” is a better word, seeing how it might be wielded by Beijing in future stand-offs with the US.

To give you a sense of the magnitude of the swing, Chinese official customs data shows the country’s total oil imports, including via pipeline and railway, fell in May to an eight-year low of 7.8 million barrels per day. That’s a third less than before the war broke out. Imports arriving by tanker plunged further still, hitting a 10-year low, more than 45% below their 2025 average.

So in May China cut its average daily waterborne oil imports by the same amount as the combined oil consumption of Germany, France and the UK. And it did so without suffering economic harm, at least from an outside view.

It’s early days, and we still don’t know much about how Beijing managed to achieve the reduction. But we can anticipate a couple of outcomes.

In the oil market itself, it will lower — perhaps permanently — the geopolitical risk premiums that traders add to oil prices, because they now know that China can smooth out large supply disruptions in a way that was unthinkable weeks ago. But it’s in diplomacy and war where the implications are more profound. China is far less vulnerable than previously thought to any oil embargo via naval blockade, a paradigm shift if conflict breaks out with Taiwan.

The then Chinese President Hu Jintao first referred to the “Malacca Dilemma” back in 2003, talking about how much of his country’s commodity imports arrived via the Malacca Strait, a narrow shipping chokepoint near Malaysia, Indonesia and Singapore. In war games, American military planners had envisaged using that dependency to block Beijing’s access to key natural resources if it attacked Taiwan. The US Navy had the added comfort that the blockade could be established far away from mainland China.

The Malacca Dilemma has shaped much of China’s natural-resources policy over the past two decades, helping to explain its move to bolster domestic energy sources. Solar and wind power came to the fore, alongside hefty investments in electric vehicles, but coal was also crucial. The country stockpiled a huge amount of oil in what’s now the largest strategic petroleum reserve. At the end of 2025, China had about 1.4 billion barrels held back, three times what the US controlled at the time, and more than six times the size of Japan’s stock.

All of these levers over energy use have been on display over the past couple of months. The use of EVs, for example, soared in April and May, with early data pointing to charging on Chinese highways increasing by 50%-80% year-on-year. The amount of coal-fired electricity generation hit a seasonal record high in April, and the country has used its coal-to-chemicals industry to provide critical products such as fertilizers despite shortages of the usual feedstocks.

🔗 https://www.bloomberg.com/opinion/articles/2026-06-16/iran-war-china-now-has-a-powerful-new-oil-price-weapon