As the United States and Iran try to negotiate the reopening of the Strait of Hormuz and restore the flow of Middle Eastern oil, future market movements may depend on one country not involved in the talks: China.
As the world's second-largest crude oil consumer, China has taken various measures to maintain supply since the war in Iran cut access to over 11 million barrels per day. By reducing imports, using extensive stockpiles, and utilizing more clean energy, China has managed to reduce the impact of higher prices within the country, if not eliminate them entirely.
These actions are also felt in the global market. After more than three months of war, some analysts predict oil prices could surge as high as $200 per barrel this year. However, despite the estimated loss of over 1 billion barrels, crude oil prices have remained relatively low. Many analysts point to China as the main reason.
"China plays an important role here in protecting the rest of Asia... as well as the global economy," said Daan Walter, principal at Ember, an energy think tank.
On Monday, Brent crude, the global benchmark, fell below $78 per barrel following expectations that the Strait of Hormuz, which carries one-fifth of the world's oil, could resume operations soon. Brent was trading below $70 per barrel in the weeks before the U.S. and Israel attacked Iran, and reached a four-year high of $114 per barrel in early May.
With China's growing influence in the global energy sector, analysts say its policies and consumption patterns will be important for the market, regardless of how quickly the Strait of Hormuz reopens.
China's Role as the 'Hidden Hand'
In an early-month research note, Societe Generale analysts wrote that the 7% loss of global crude oil supply from the 1973 Arab embargo caused a 134% increase in oil prices. However, prices did not spike as much during the Iran war, even though the conflict affected 14% of global supply.
They attributed this discrepancy largely to China as the "hidden hand" balancing the market, due to its ability to reduce oil imports by about 3 million barrels per day - an amount nearly equal to Japan's oil demand.
China can significantly reduce usage for several reasons. Before the war, China built up crude oil inventories, helped by cheap oil shipments from Russia and Iran, which were under sanctions, said Janiv Shah, head of the oil market at Rystad Energy. Now it has over 1 billion barrels in commercial and strategic reserves, which began being used in May, according to analysts.
"China has put a floor under prices," said Shah. "This year, the pattern has reversed."
The government has also restricted exports of refined products like diesel and gasoline to ensure domestic supply. This has curbed incentives for Chinese refiners, who face lower margins and are cut off from foreign markets, from buying crude oil from the global market.
Meanwhile, the boom in Chinese electric vehicles (EVs) has offset the country's need for fossil fuels. About one out of every two new passenger cars sold in China is now a new energy vehicle. According to estimates from the International Energy Agency (IEA), China's EV fleet reduced oil consumption by about 1 million barrels per day last year.
"This is a great pressure valve for the global crude oil market," said David Fishman, principal at Lantau Group, specializing in the Chinese energy and power sector.
Although high prices may continue to weaken demand from consumers and refiners, China's ability to mitigate global supply shocks may be limited by how long it can maintain fuel reserves, he said.
"The thing that cannot be sustained forever is crude oil stockpiles," said Fishman. "If prices weaken, you would expect the first thing they do is start replenishing."
From Shortage to Surplus Supply?
After months of expecting the effects of the worst oil crisis in history, the IEA now warns that the reopening of the Strait of Hormuz could trigger a surplus of supply next year.
In its monthly oil report released on Wednesday, the IEA predicted that supply growth will exceed demand next year by 4.7 million barrels per day, as Middle Eastern crude production returns to normal levels.
"This may provide relief to the market and an opportunity to refill inventories that have been depleted, or build new strategic reserves, as countries review their energy strategies and policies in response to the crisis," the organization wrote in its report.
Although global oil demand is expected to grow next year, recent volatility has increased interest in renewable energy, which can also reduce crude oil use in the long term. China, the world leader in EVs, batteries, and solar, recorded record exports of clean energy technology products in March following the start of the Iran war.
"The acceleration toward electrification is increasing," said Cosimo Ries, an analyst at Trivium China, covering energy and automotive sectors. "We need to see how the [U.S.-Iran] talks will proceed, but generally, this could be a good time for global decarbonization."
Muyu Xu, senior oil analyst at Kpler, a commodity research platform, said a surplus could arrive as early as next month. If the Strait of Hormuz reopens quickly, that means 100 million barrels of stranded oil will be injected back into the market, he said.
Meanwhile, Iran may aggressively increase its own production, especially if U.S. sanctions are lifted. But that might make Iranian oil less attractive to China, which has bought it at discounted prices because Iran, under sanctions, had few other ways to sell.
However, Xu added that many countries have already fulfilled their crude oil demand for summer, and China could again be crucial in restoring market balance.
"This is a completely different picture from just two months ago," said Xu. "Now, the country with the capacity to absorb surplus supply is China. But the problem is: What does China want to buy?"
*Original source: [edition.cnn.com](https://edition.cnn.com/2026/06/22/energy/oil-price-china-dependence-iran-war-intl-hnk)*