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China’s dependence on the energy supplies that move through the Strait of Hormuz makes it especially vulnerable to any possible closure of the waterway by Iran in retaliation for attacks by Israel and the United States.
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China’s dependence on the energy supplies that move through the Strait of Hormuz makes it especially vulnerable to any possible closure of the waterway by Iran in retaliation for attacks by Israel and the United States. Half of China’s crude oil imports flow through the Strait of Hormuz.[i] In addition, around 29 percent of China’s liquefied natural gas (LNG) imports originate from Qatar and the United Arab Emirates (UAE). The prospect of a disruption of these LNG flows – let alone an actual closure of the waterway – could reinforce China’s preference for pipeline gas imports and domestic energy resources. China does have options such as seeking more pipeline gas imports, boosting domestic production and managing demand that can help alleviate a disruption. Longer term, however, China could reassess the role that LNG plays in its energy mix, by either prioritizing the use of domestic energy resources to reduce future gas demand growth or by turning to alternative gas supply sources such as pipeline gas imports, especially from Russia.
How would a closure of the Strait of Hormuz impact LNG exports from the Persian Gulf in general and to China in particular?
The closure of the Strait of Hormuz would disrupt approximately 110 billion cubic meters (bcm) of net LNG exports, about 20 percent of global LNG trade.[ii] China is the largest LNG importer from the region, receiving 27.5 bcm from Qatar and the UAE over the past year, representing 25 percent of total net LNG exports through the Strait and 29 percent of the LNG exported to China during the same period. The next largest importers from the region are India (20.8 bcm), South Korea (11.7 bcm) and Taiwan (10.4 bcm). While China would be the most affected in absolute volume, countries like India, Taiwan and Pakistan are more reliant on these supplies relative to their overall consumption and imports. Moreover, Chinese gas demand has been soft so far in 2025, with LNG imports declining for seven consecutive months.
Source: S&P Global.
How is China likely to respond to a disruption of LNG flows through Hormuz?
China has security of supply responses it can activate in the short term in the case of a disruption of LNG flows that address both supply and demand.
Supply-side responses:
Increase pipeline gas imports: While there is a limit to the amount of additional Russian supplies that can be brought in as the Power of Siberia 1 pipeline is already operating at capacity, China might also be able to increase deliveries via Central Asia, if Russian gas deliveries to Uzbekistan and Kazakhstan increase.
Increase domestic production: 2025 is the last year of the seven-year action plan to increase domestic oil and natural gas exploration and production. China’s national oil companies (NOCs) have already spent hundreds of billions of dollars on this, and as of mid-2024, annual investment in boosting reserves and production had averaged $48 billion since 2018. China’s NOCs are inclined to spend more as the rapid deployment of electric vehicles in China is hastening the arrival of the country’s peak oil demand. In contrast, China’s NOCs expect the country’s natural gas demand to peak between 2035 and 2040. Consequently, they have vowed to spend more on domestic gas output.
Tap into storage: Withdrawals from underground gas storage, estimated to have a capacity of 55 bcm as of end-2024, could help. However, a disruption of LNG flows during the summer – typically the injection period when inventories are built up for the winter – would limit China’s ability to replenish reserves. As a result, gas storage facilities may be only partially refilled ahead of the winter period. But the conflict in the Middle East might strengthen Beijing’s commitment to expanding China’s natural gas storage since the share of consumption covered by current levels is substantially below that of Europe and the United States.
Demand-side responses:
This would involve measures such as voluntary demand reduction, and, potentially demand destruction driven by high prices. Another option would be fuel switching in the power and industrial sectors – most notably an increase reliance on coal, which can be increased in the very short term given the strength of China’s coal production, as well as potentially greater use of renewables and nuclear energy in power generation. However, the closure of the Strait would effectively block any switch to refined petroleum products, as that market would also quickly tighten.
What could be the longer-term impact?
Even if Iran does not close Hormuz, the conflict in the Middle East could have a long-term impact on China’s LNG imports if the country decides to either prioritize domestic energy sources and double-down on energy self-sufficiency at the expense of gas consumption or use alternative gas supplies.
The current conflict is the latest in a series of geopolitical developments that raises questions about the security of China’s LNG imports from some of the world’s largest LNG exporters. US sanctions on Russia following its invasion of Ukraine have stopped the development of Russia’s Arctic LNG 2 project, which otherwise would have the capacity to send more LNG to China. The US-China tariff war has effectively killed LNG trade between the two countries. China’s imports of LNG from the United States fell to zero in February after China imposed a 15 percent tariff on US LNG.
These developments should make domestically produced gas and pipeline imports even more attractive. Indeed, Russia has been a reliable supplier of pipeline gas to China. As noted, the Power of Siberia pipeline is now operating at its full capacity of 38 bcm, and the Far Eastern route will supply an additional 10 bcm after it starts deliveries in 2027. If Beijing decides that that the risks of importing more LNG outweigh the risks of increasing its dependence on Russia, China’s largest natural gas supplier (pipeline and LNG imports combined), Beijing might be inclined to further increase pipeline deliveries from Russia, either by expanding the capacity of the Power of Siberia pipeline or reconsidering the proposed Power of Siberia 2 pipeline. Finally, a recent IEA report highlighted China’s substantial biomethane potential, that could lower import needs.
The conflict in the Middle East may also prompt China to reassess the role of LNG in its energy mix and prioritize the use of coal and renewables. These resources are not only domestically available. They are also cheaper sources of electricity. Data from Shenhua, one of China’s largest utilities, reveals that the company’s gas-fired tariff is substantially higher than those for coal, hydro, renewables and nuclear.
The events in Iran would not represent the first time that a war has spurred Chinese analysts to champion reduced dependence on external energy sources. After Russia’s invasion of Ukraine, Chinese energy experts called for increasing energy self-sufficiency to include accelerating the development and deployment of green technologies.
[i] For 2024, this includes the 4.1 million barrels per day (bpd) that China’s General Administration of Customs reported as coming from Saudi Arabia, Iraq, the United Arab Emirates, Kuwait and Qatar plus 1.4 million bpd from Iran via third countries, notably Malaysia. See General Administration of Customs of the People’s Republic of China, “Customs Statistics,” http://stats.customs.gov.cn/indexEn; and Maryelle Demongeot, “Iran-China ties in focus as US Pressure Grows,” Energy Intelligence, March 27, 2025,
https://www.energyintel.com/00000195-d1fc-d775-a9df-f3fca6fd0000.
[ii] 120 bcm of LNG were exported by Qatar and the UAE over the past 12 months. However, some of these flows stay within the Persian Gulf (Kuwait, the UAE), while Kuwait also imports from outside the Gulf. In case of a disruption, the authors estimate that around 110 bcm of net LNG exports would be impacted.
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