The Strait of Hormuz, just 29 nautical miles (54 km) wide at narrowest point is one of the world's most critical oil routes. The mounting disruptions in the waterway has shocked economies around the world, yet the impact on China, Iran's largest crude buyer is largely muted as it has been cutting back demand significantly, insulating itself from the worst effects of the bottleneck.
While Beijing continues to rely on Tehran for discounted oil, weaker domestic demand, refinery cutbacks, record stockpiles and the rapid rise of electric vehicles have reduced its need for fresh imports.
The slowdown has become one of the biggest surprises in the global oil market. According to data from Kpler and Vortexa, China's crude imports fell sharply in May, helping offset part of the supply shock caused by the near-closure of the Hormuz.
The world's oil lifeline
The Strait of Hormuz is a narrow waterway linking the Persian Gulf with the Arabian Sea. Bounded by Iran to the north and Oman and the United Arab Emirates to the south, the strait handles roughly a quarter of global seaborne oil trade.
Countries including Iran, Iraq, Kuwait, Qatar and Bahrain rely heavily on it for exports, while Asian economies remain among its biggest customers.
With limited alternative routes available, any disruption to traffic through Hormuz can have immediate consequences for global energy supplies and oil prices.
China's imports fall to a decade low
The conflict in the Middle East, which began on February 28, sent shockwaves through energy markets. Brent crude surged from around $70 per barrel before the conflict to above $125 at its peak.
Although prices have since eased amid hopes of de-escalation, crude has largely remained elevated between $90 and $100 a barrel, keeping governments and businesses on edge.
China largely escaped the immediate impact of the oil crisis in the Persian Gulf thanks to ample crude stockpiles, floating storage and a diversified network of suppliers. However, the effects of higher oil prices and supply disruptions began to filter through the economy.
In the early stages of the crisis, Beijing restricted fuel exports and encouraged independent refiners to maintain production levels, even at a loss, to shield consumers from rising costs. The refining sector has since scaled back operations amid uncertainty over crude supplies and weak refining margins.
The slowdown has also raised questions about underlying fuel demand in China, where electric vehicles, LNG-powered trucks and high-speed rail networks are rapidly reducing dependence on oil.
According to Goldman Sachs, average retail fuel prices rose 17% year-on-year during March and April, while retail fuel sales volumes fell by the same percentage.
For China, which imports about 70% of the oil it consumes, the disruption initially raised fears of a major energy shock. However, instead of rushing to buy more oil, China cut purchases.
China's crude oil imports fell sharply in May to their lowest level in a decade and could remain subdued in the coming months, as weaker demand, refinery run cuts and limited fuel exports help the world's largest oil importer absorb the impact of the Iran conflict.
According to data intelligence firm Kpler, crude arrivals dropped to 6.7 million barrels per day in May. By comparison, China imported an average of about 11.6 million barrels per day of seaborne crude during 2025.
"This trend of lower Chinese buying could continue through the summer," Sumit Ritolia, lead analyst for refining supply and modelling at Kpler said, as per Reuters.
Ship-tracking firm Vortexa estimated imports at between 7 million and 7.5 million barrels a day, still significantly below normal levels. The reduction has helped offset part of the global supply disruption caused by the conflict and the effective closure of Hormuz.
What is changing the equation?
One reason China has been able to cut crude imports without facing an immediate supply crunch is its massive oil stockpile. According to Reuters, the country stores part of its imports in a vast and largely secretive strategic petroleum reserve.
While the exact size of these reserves is unknown, analysts estimate that, combined with commercial inventories, China holds enough oil to replace imports passing through the Strait of Hormuz for several months.
China's strategic petroleum reserves (SPR) are believed to have increased by around 8 million barrels since the conflict began, according to estimates from Kpler.
Despite concerns over supply disruptions, China's refining sector has shown little urgency to ramp up production. According to Kpler and Energy Aspects, refinery throughput in May and June is estimated at around 13 million barrels per day.
That level was last seen during the early months of the Covid-19 pandemic in 2020.
China's response has not been limited to stockpile usage. State-owned and private refiners have sharply reduced processing rates as profit margins deteriorated and demand weakened.
China Petrochemical Group and independent refiners have led the production cuts. According to Energy Aspects, private refinery runs are expected to decline by around 200,000 barrels per day in June as Beijing adopts a more flexible approach toward production targets.
China's rapid adoption of electric vehicles is also reducing oil demand in ways that previous energy crises never could. According to Vortexa analyst Emma Li, the country's transport system has become far more flexible than during earlier oil shocks.
"The rapid adoption of EVs has contributed to a drop of about one million barrels a day in fuel demand this quarter," she said.
Chinese government data showed EV charging activity on highways during the May Day holiday surged more than 55% compared with a year earlier. Nearly one-quarter of vehicles on Chinese highways during the holiday was an EV, up 33% from the previous year.
At the same time, air travel declined 5.7%, largely because of fewer international trips. Regional flights rose 3.5%, while rail travel increased 4.6%, reflecting a broader shift toward alternative modes of transport.
According to CNN, China has managed to reduce oil demand not through rationing but through changing consumer behaviour, with more drivers switching to electric vehicles and greater use of public transport.
Why Iranian crude is attractive to China ?
Despite reducing imports, China remains Iran's most important oil customer. The two countries established diplomatic relations in 1971. Following Iran's 1979 Islamic Revolution, Beijing gradually became one of Tehran's most important economic and diplomatic partners.
According to Brookings Institution scholars Ryan Hass and Allie Matthias, Iran remains a "mid-tier" partner for China, though Beijing is far more important to Tehran than the reverse.
One of the main reasons China continues to buy Iranian crude is price. US sanctions have forced Iran to sell its oil at a discount compared with global benchmarks, making it particularly attractive for Chinese refiners looking to lower costs.
As the world's largest crude importer, China benefits from access to a steady supply of discounted oil, especially during periods of higher global prices and geopolitical uncertainty.
Most recently to attract buyers, Iranian crude sellers have also sharply lowered prices. Iranian Light crude for July delivery was recently offered at a discount of more than $1 per barrel to the ICE Brent benchmark, compared with a premium a month earlier, traders said.
China has also helped sustain Iranian oil exports despite sanctions. Traders and analysts say Chinese refiners and shipping companies often rely on a "shadow fleet" of tankers, ship-to-ship transfers and complex trading networks that can obscure the origin of crude cargoes.
This helps explain why China has a strong interest in ensuring Iran remains economically viable despite sanctions and regional instability.
The shadow fleet that keeps oil flowing
Despite sanctions, Iranian crude continues reaching Chinese ports through complex shipping networks. According to The Wall Street Journal, tankers carrying Iranian oil frequently conduct ship-to-ship transfers in waters near Malaysia before cargoes are shipped onward to China.
The report said crews often conceal vessel identities, alter markings and switch off tracking systems to obscure the origin of cargoes. This "shadow fleet" has become a critical component of Iran's oil exports and China's access to discounted supplies.
China's independent refiners, commonly known as "teapots", are the largest buyers of Iranian crude, accounting for around 90% of Iran's oil exports to China. However, many of these refiners are facing growing financial strain as weak refining margins push operations deeper into the red.
In recent months, Beijing had encouraged refiners to maintain fuel production to help cushion the impact of disruptions caused by the Middle East conflict. But as losses mounted, authorities have become more willing to allow production cuts.
"Buyers aren't accelerating procurement even if supply is tight, because prices are still too high for teapots who are suffering great losses," Kpler senior crude analyst Xu Muyu told Reuters. "Also teapots are lowering run rates, so demand is also coming down," Xu added.
Is the demand destruction permanent?
Not everyone believes the trend will last. US Energy Secretary Chris Wright argued that China's response reflects a temporary crisis strategy rather than a permanent shift.
"They were building a strategic petroleum reserve (SPR), now they've stopped building, they're releasing some from their reserves," Wright said.
"They have turned down their refineries, so that's producing less products. That's in response to a crisis, that's not a permanent change."
Others disagree. Analysts note that China's growing EV fleet, expanding rail network and changing consumer habits could permanently reduce oil demand growth.
The world has witnessed similar structural changes after the 1973 oil embargo, which led to greater fuel efficiency, strategic petroleum reserves and alternative energy investments across major economies.
The current situation echoes the global response to the 1973 oil embargo, which triggered lasting changes in energy consumption around the world.
Much depends on the future of the Strait of Hormuz and the Iran conflict. Analysts expect Chinese refiners to return to international markets once reserves are drawn down significantly or if disruptions persist for longer than expected.
"But government authorisation, subject to Beijing's outlook on Hormuz, will be needed before sizeable buying returns," Energy Aspects analyst Jianan Sun told Bloomberg.
For now, however, China appears content to rely on stockpiles, lower refinery runs and an increasingly electrified transport system rather than aggressively bidding for crude in a volatile market as Iran faces its biggest crisis in years.
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