The closure of the Strait of Hormuz, which before the conflict carried approximately 20 million barrels per day representing a fifth of global daily oil consumption, has had a notably muted impact on global oil markets compared to previous Middle East crises. This restraint is largely attributable to China's strategic decision to utilize its vast oil reserves rather than purchase crude at inflated wartime prices. Historically, comparable disruptions have triggered far more severe price shocks.
The 1973 Arab oil embargo, which disrupted only seven percent of global supply, quadrupled prices, while the 1979 Iranian revolution and 1990 invasion of Kuwait, each blocking six to seven percent of global supply, more than doubled prices. By contrast, current oil prices have risen approximately 50 percent, with Brent crude, the international benchmark, stabilizing near USD 85-90 per barrel, up from around USD 60 at the start of 2026. China, the world's largest crude oil importer, has been instrumental in moderating this price response.
The country maintains strategic oil reserves exceeding 1.2 billion barrels, which analysts believe could sustain the nation for at least a year. Beijing has simultaneously implemented a dramatic reduction in seaborne crude imports, decreasing purchases by over three million barrels per day. Rather than competing for Gulf crude at elevated prices, China has restricted exports of refined products including diesel, petrol, and jet fuel to prioritize domestic consumption and has scaled back refinery activity to meet only essential needs.
Jack Prandelli, a commodity trader cited in the report, characterized Beijing's approach as "preserving a high cushion" by using reserves as a "buffer instead of chasing barrels in a disrupted Gulf market." The restraint has been reinforced by unprecedented emergency releases from the International Energy Agency totaling 400 million barrels, as well as sharply reduced consumption across Asia. Recent developments suggest a potential shift in China's posture. In July 2026, China posted a small surplus of 210,000 barrels per day, surprising analysts given the drastic reduction in imports since March.
However, this reflects Chinese refiners slowing output faster than exports have declined rather than a meaningful increase in crude purchases. Prandelli characterized this as "a pause in an extended destocking cycle rather than a decisive pivot to aggressive restocking." Brent crude fell to USD 78 per barrel in the first week of August from an average above USD 90 the previous month. Duncan Wrigley, chief China economist at Pantheon Macroeconomics, attributed a slight improvement in oil imports to improved refiner margins resulting from lower crude prices.
However, Prandelli expressed skepticism about trend continuation, noting that import volumes are expected to stall or reverse in August as refiners rely more heavily on inventories amid higher prices and continued Hormuz disruption. Beijing has also relaxed restrictions on refined fuel exports for a second consecutive month in August, approving shipments of up to 2.7 million metric tons to international destinations. This easing occurred despite continued instability affecting vessels transiting Hormuz and was characterized as "unexpected" by analysts.
Wrigley suggested the move indicated "perhaps misplaced optimism that global oil supplies would start to normalise." Diplomacy surrounding Hormuz has proven volatile. Early August saw optimistic signals from the United States and mediators Qatar and Pakistan suggesting Washington and Tehran might reach a longer-term agreement on strait access. However, this sentiment shifted on August 9 when Trump indicated he would maintain "economic pressure" on Iran and reiterated military threats.
The memorandum of understanding between the two countries expired on August 17 without renewal, resulting in record low traffic through the strait with only five vessels transiting the previous weekend. Analysts anticipate that China will not resume filling strategic reserves from the Gulf until Hormuz stabilizes. Wrigley suggested Chinese refiners are opportunistic buyers likely to increase purchases only after a "marked fall in crude oil prices." Prandelli identified two conditions for resumption: clarity that the war has transitioned from "acute disruption" to stability, and "a meaningful discount on Gulf barrels versus Russian and Atlantic Basin alternatives." China's broader energy strategy has rendered the country particularly resilient to supply shocks.
Beijing produces 60 percent of its natural gas from domestic shale and coal, electrification reduces import dependency, and electric vehicles account for over half of all automobiles sold in China. The country has also diversified crude suppliers beyond the Gulf to include Central Asia, Russia, Iran, Latin America, and Africa. This diversification contrasts sharply with neighboring Japan, South Korea, and Taiwan, which remain heavily reliant on Middle Eastern crude.
China continues to source Iranian crude despite sanctions, primarily through small tankers that disable transponders, with oil sold at discounted prices. Russia has emerged as China's largest crude supplier at over two million barrels per day, exceeding 20 percent of total imports. Much of this flows through Russia's "shadow fleet" of clandestine tankers evading Western sanctions, with many vessels aging and at risk of environmental disaster.
Some analysts have suggested China is assuming influence traditionally held by OPEC, particularly since the UAE departed the organization in April 2026. However, interviewed experts expressed skepticism about this characterization. Wrigley stated "I don't think China is doing so at all," explaining that the drop in China's oil imports "is an intended by-product of policy, rather than a strategic move to set oil prices." Rory Green, China economist at TS Lombard, suggested that China's reserves have acted as an oil price deflator thus far, but indicated this could reverse once Hormuz reopens, as restocking "is likely to move from an oil price deflator to an inflator, limiting the scope for declines in global benchmarks." Prandelli cautioned that while Russian oil functions as a workable short-term substitute, it is not a perfect replacement for Middle Eastern flows regarding logistics, grades, and political diversification.
Analysts generally agree that Russian oil represents a near-term solution rather than a long-term strategic answer. Source: Middle East Eye (21 August 2026)
Source: middleeasteye.net