Why the Iran war isn’t hurting China — yet

While the US deals with rising gas and fertilizer costs, the Chinese economy has proven surprisingly resilient during the Hormuz crisis

‍What you’ll learn in this article: 

• How petroleum stockpiles and overland shipping routes mean China won’t run out of oil anytime soon. 
• The Chinese coal-to-chemicals innovation that’s further cutting its reliance upon oil. 
• How other Asian economies are being hit hard — and how their struggles could impact U.S. importers. 

🎯 Best for: Strategic planning leaders across the petroleum, plastics, and automotive industries.

Despite relying upon Gulf states for more than 50% of its crude oil needs, threatening national economies from the Americas to Europe to Asia, China has managed to withstand the three-month-long closure of the Strait of Hormuz with few repercussions to its economy. 

As the Iran war entered its fourth month this week, the Hormuz Crisis has caused global prices to rise for gasoline and petroleum derivatives, as well as for such crucial industrial inputs as aluminum and fertilizer. The Strait’s closure is expected to continue putting upward pressure on prices for an ever wider variety of goods in the months ahead, including groceries, canned goods, plastics, and automobiles.

China, however, “has a massive insulation blanket that is dampening the war’s impact,” explains ImportGenius Director of Research William George, who wrote in detail on the subject for the Hinrich Foundation, noting that other Asian economies are on more precarious footing. “The irony is that U.S. importers who still rely on China are likely to benefit from that stability, while those who diversified into countries such as Japan and Vietnam could see their supply chains disrupted,” says George. 

Crude reserves that dwarf America’s

China has by far the world’s largest stockpile of crude oil reserves, insulating the country from price fluctuations and supply shocks. At nearly 1.4 billion barrels, China’s strategic reserve is larger than the combined reserves of nine other countries surveyed by ImportGenius, and more than quadruple the size of America’s reserves alone. 

The reserve is crucial for China because it relies upon six Gulf states (Saudi Arabia, Iraq, the United Arab Emirates, Oman, Qatar and Kuwait) for 42% of all its petroleum needs. China also relies upon Iran for approximately 13% of its crude oil imports, though that figure is not official as Iran’s sanctioned oil is purchased on grey markets. 

With that oil stuck in the Persian Gulf, China has turned to overland sources to maintain flow and stretch the life of its reserve. According to ImportGenius data, China imported more than 1.7 million barrels of oil from Kazakhstan in March 2026, a year-over-year increase of 142%. 

The coal-to-chemicals advantage

China, aware of the importance of petroleum-based chemicals for downstream industries, has also developed new industrial technology that has yet to be replicated elsewhere: coal-based chemicals. The process allows propylene and ethylene to be produced without the need for naphtha, a key product in petroleum refining that’s essential to plastics manufacturing.

“China is the world’s largest producer and importer of coal, with most of its imports coming from Australia and Russia, so this industry has zero dependence upon the Gulf region,” says George. 

Struggles in Japan, Vietnam put supply chains at risk 

Japan, despite having the world’s third-largest strategic reserve of crude oil, finds itself in a more difficult position than China. The country has relied upon the Gulf region for 95% of its crude imports, 70% of which transited the Strait of Hormuz. 

Japan also relies upon the Gulf for the naphtha its plastics industry requires. With that supply effectively cut off, Japan has increased its imports of propylene, ethylene and butadiene from China to keep those industries running. Japan has also had to shore up its own regional supply chain relationships, providing Vietnam — which has no sizeable petroleum reserves — with four million barrels of oil. 

Vietnam’s plastics industry, which depends upon Gulf chemicals for production, serves multiple importing countries around the world — especially the United States. “A sustained shortage of naphtha and other chemicals from the Gulf will threaten Vietnamese plastics, and that will cascade through to the country’s trading partners,” says George. 

For any business that imports goods from Asian countries, the Hormuz crisis adds yet another wrinkle to their planning  and their bottom line. While high tariff rates caused some companies to diversify away from China, the Iran war’s supply shortages have disproportionately affected China’s Asian neighbours and competitors. “Last year, tariffs were driving the decisions about supply chain management,” says George. “This year, supply shortages will play a primary role in those choices. And it’s not just a shortage of oil, but of all its derivatives — and the many downstream industries that rely upon them.”

[CT1]