With Strait of Hormuz traffic nearly halted, China’s reliance on Iranian oil could trigger “real problems” within two months if the crisis continues, one expert warned.
Gatestone Institute senior fellow Gordon Chang assesses how escalating tensions around the Strait of Hormuz could reverberate through China’s fragile, export-dependent economy.
Oil tanker at a port in the Strait of Hormuz. (Giuseppe CacaceI/AFP via Getty Images)
Chang noted that a significant share of China’s discounted Iranian crude, vital for its independent “teapot” refiners, typically transits the narrow waterway, where ships are now largely stalled north and south of the Strait.
“Much of that oil… actually goes to China trying to get somewhere between… 15% and 23% of its seaborne oil from Iran, and that oil transits the Strait of Hormuz,” Chang said.
He added that while Beijing has diversified supplies, the loss of heavily discounted barrels comes at a vulnerable moment for factories dependent on cheaper energy.
“This will go through the system, and I suspect you will see real problems in about two months in China if this situation continues,” Chang said.
Hayman Capital Management founder and CEO Kyle Bass discussed market reaction and the broader energy shock rippling through global supply chains.
Bass pointed to insurance withdrawals and the strategic weight of the choke point, warning that even a temporary disruption could send front-month crude prices sharply higher.
“About a third of the world’s seaborne crude flows through that strait every day. Fifty percent of China’s imports flow through that strait every day. And right now, things are not going through the strait,” Bass said.
“If 10 million barrels goes missing or gets delayed for a week, there’s no telling where the front end can go,” Bass added.
With insurers retreating, LNG shipments disrupted and tanker traffic effectively frozen, the crisis underscores how a five-mile-wide passage can shape the economic trajectory of the world’s second-largest economy.
“We’re at risk of a pretty major oil price spike here,” Bass said.