For China, the implications of the conflict in Iran extend far beyond a mere energy shock; it represents a veritable watershed moment.
Military operations by the US and Israel against Iran have now persisted for over three weeks. Rather than a swift resolution, the conflict is gradually sliding into a war of attrition, potentially evolving into a long-term standoff. The Iranian regime has not collapsed. Instead, it is exerting pressure on Washington through selective blockades of the Strait of Hormuz.
Consequently, the significance of this conflict extends far beyond regional security, rapidly spilling over into a systemic shock capable of reshaping the global energy pricing system, trade cost structures, and even financial expectations. For China, the crux of the matter is not whether it will be affected, but how this impact will translate into deeper structural changes.
In the short term, China's economy will inevitably face impacts, yet its performance is more robust than external observers anticipate. As the world's largest crude oil importer, China does have a high dependency on external energy structures, with a significant portion of seaborne crude passing through the Strait of Hormuz. However, China’s energy security framework developed over the past two decades is now playing a critical role.
China's overland energy corridors are now largely in place, and import sources have diversified, significantly reducing reliance on any single region. More critically, China has built substantial strategic energy reserves, sufficient to cover several months of net import demand, providing a valuable time window for policy adjustment and market adaptation. Simultaneously, the energy structure itself is quietly shifting. The rapid adoption of new energy vehicles, along with the development of photovoltaic, wind power, and storage systems, is marginally reducing economic growth's dependency on oil. This Middle East turmoil is bound to accelerate China's structural energy transition.
In the short term, the challenge for China is not the availability of energy, but the chain reactions triggered by energy price volatility. It is precisely at this point that the impact of the Iran conflict on China's economy begins to manifest.
If instability in the Strait of Hormuz shifts from an isolated incident to a sustained expectation, rising oil prices will no longer merely reflect supply and demand dynamics but will embody a concentrated risk premium. Once oil prices enter a high range, the impact will transmit rapidly to the global economy, including China, through inflation expectations, interest rate policies, and capital market repricing mechanisms.
For China, this impact is dual in nature. On one hand, rising energy prices will push up manufacturing costs. Coupled with increased shipping and insurance fees, this will further compress export profit margins. Given that China's economy still maintains a high dependency on external demand, if global growth slows due to high inflation, export momentum will inevitably be suppressed.
On the other hand, this shock is not entirely negative. A key macroeconomic background China currently faces is a low price level, with even some deflationary pressure. Under these conditions, moderate imported inflation could instead exert a certain corrective or stimulative effect on the economy. In other words, for China, the real risk lies not in rising inflation, but in inflation spiraling out of control. As long as oil prices remain in a high but controllable range, the resulting impact may involve both pressure and repair.
However, if we shift perspective from short-term volatility to the medium and long term, the significance of this conflict will be reflected more at the structural level.
First, global manufacturing is being redistributed. In an environment of high energy prices, the cost pressure borne by different economies is uneven. For economies highly dependent on energy with relatively dispersed industrial chains, rising costs will quickly erode manufacturing competitiveness. For China, which possesses a complete industrial system, scale advantages, and cost pass-through capabilities, this shock may instead reinforce its position in the global supply chain – though this advantage is unevenly distributed across sectors. Against an inflationary backdrop, global buyers tend to prefer products with higher price competitiveness; thus, the advantage of "Made in China" will be further amplified, potentially expanding China's export market share and allowing the relative advantages of China's supply chain to play a greater role.
Second, the direction of global capital flows is shifting. The Middle East has long been a significant capital exporting region. Once the regional security environment deteriorates, capital will inevitably seek new stable destinations. Regional financial centers such as Singapore and Hong Kong may absorb some of this capital inflow during this process. This implies not only a change in capital scale but could also have deeper implications for the regional financial landscape.
Third, the international monetary system is undergoing gradual evolution. As energy transit routes come under pressure, the alignment between transportation corridors and settlement currencies may tighten — creating new and realistic space for the RMB's role in global energy trade to deepen incrementally.
Meanwhile, the advancement of the Belt and Road Initiative will also face new constraints and adjustments. As a key node connecting Central Asia, West Asia, and Europe, turmoil in Iran will undoubtedly increase security risks and financing costs for regional projects. This may prompt China to shift from scale expansion to focusing more on safety and sustainability when advancing related layouts, and to accelerate the exploration of alternative corridors.
On a deeper level, how China and the US interact strategically is changing. Energy issues are gradually becoming a key variable in their strategic dynamic. On one hand, the US may attempt to enhance strategic containment of China by influencing energy channels and supply systems; on the other hand, China is lowering such external constraints through supply diversification and energy transition.
However, this strategic dynamic is not one-way. If the US is bogged down in the conflict for the long term, its resource allocation capabilities and international credibility may both be depleted, conversely buying China greater international strategic maneuvering space.
In such an uncertain environment, China's choice to maintain restraint and prudence is not passive observation, but a strategy based on structural judgment: before the contours of the external shock become clear, China appears to be calibrating its response carefully, while reserving space for potential structural changes.
Therefore, for China, the significance of the Iran conflict extends far beyond a mere energy shock; it is more like a watershed: in the short term, it tests China's economic resilience; in the long term, it drives the redistribution of global structures, redefining China's position in the process.
If China can transform external shocks into momentum for internal adjustment, completing further optimisation in energy structure, industrial systems, and international layout, this seemingly external uncertainty could instead become an opportunity to drive its own transformation. In this sense, the Iran conflict may not determine China's trajectory, but it could accelerate a process—a process moving from energy shock towards structural reshaping.
For further reading, please visit Lianhe Zaobao here, where this article was first published in Chinese on 26 March 2026.