China and the Hormuz Crisis: Fresh Momentum for the Green Transition?

Abstract

The closure of the Strait of Hormuz—through which roughly 20 percent of global oil consumption transits—triggered what the International Energy Agency (IEA) described as the largest supply disruption in the history of the global oil market. Beyond the immediate market shock, the crisis has underscored the strategic risks associated with continued dependence on fossil fuels and a small number of critical maritime chokepoints. This issue brief analyzes how the Hormuz Crisis is reinforcing China’s centrality within the emerging clean energy order and the broader geostrategic implications of this shift. It argues that the crisis is not merely a temporary disruption of global energy flows, but also a catalyst accelerating structural changes already underway in the global energy system. China’s growing role in the clean energy transition is likely to create new opportunities, but also new dependencies, for countries seeking to strengthen energy security while advancing decarbonization.

Introduction

On June 14, the United States and Iran reached an interim agreement after nearly four months of escalating hostilities that culminated in the Hormuz Crisis. While the resumption of negotiations has provided some relief to energy markets, the disruption has already highlighted the fragility of the existing global energy order.

The closure of the Strait of Hormuz—through which roughly 20 percent of global oil consumption transits—triggered what the International Energy Agency (IEA) described as the largest supply disruption in the history of the global oil market, pushing Brent crude prices rising above USD 120 per barrel for the first time since 2022. Record inventory drawdowns and unprecedented releases from strategic reserves have further exposed the limited buffers available to absorb prolonged disruptions of this kind.

Beyond the immediate market shock, the crisis has underscored the strategic risks associated with continued dependence on fossil fuels and a small number of critical maritime chokepoints. As governments seek to reduce exposure to future disruptions, the Hormuz Crisis is thus accelerating a broader transformation of the global energy order, strengthening the imperative for clean energy alternatives.

In this context, China’s position warrants particular attention. After more than two decades of state-led investment, Beijing has established a near-monopoly across key segments of the clean energy value chain—from upstream processing of critical minerals to the mass manufacturing of solar panels, batteries, and electric vehicles (EVs). The acceleration of the energy transition therefore raises broader questions regarding the implications of growing reliance on Chinese industrial capacity, technology, and supply chains for the future global energy system.

This issue brief analyzes how the Hormuz Crisis is reinforcing China’s centrality within the emerging clean energy order and the broader geostrategic implications of this shift. It argues that the crisis is not merely a temporary disruption of global energy flows, but also a catalyst accelerating structural changes already underway in the global energy system. China’s growing role in the clean energy transition is likely to create new opportunities, but also new dependencies, for countries seeking to strengthen energy security while advancing decarbonization.

Crisis as Catalyst: China’s Energy Recalibration

Prior to the Hormuz Crisis, China had already embarked on a long-term effort to reduce its structural dependence on imported fossil fuels. This objective has been pursued through targeted industrial policies, large-scale investments in renewable energy capacity, and the expansion of domestic energy infrastructure over the past decade. While coal continues to account for the largest share of China’s energy consumption (51.4 percent), crude oil represented only 18.2 percent in 2025, compared to 30.4 percent for renewable energy sources.

China also entered the crisis with substantial strategic and commercial crude reserves following years of sustained stockpiling efforts. According to data from the U.S. Energy Information Administration, Beijing reportedly accumulated a surplus of 1.2 million barrels per day in the first months of 2026, and holds total reserves estimated at 1.4 billion barrels. This represents more than the combined strategic inventories of the U.S., Japan, OECD Europe, Saudi Arabia, South Korea, Iran, the UAE, and India. While the closure of the Strait of Hormuz still poses significant risks, given China’s continued reliance on imported oil and gas, these reserves have nonetheless provided Beijing with greater short-term flexibility to absorb the current energy shock than many other major energy-importing economies.

Rather than fundamentally altering its energy trajectory, the ongoing crisis has thus sharpened China’s strategic focus and injected renewed momentum into its green transition efforts. The disruptions have acted as a political accelerant, strengthening the case across the Chinese policy apparatus for moving faster on a transition already underway. Recent official messaging points to a more coordinated and urgent approach at multiple levels of governance. Premier Li Qiang has doubled down on the need to advance the expansion of non-fossil energy and build a new energy system, encouraging faster institutional reforms and innovation. This shift has also been reflected in increased policy guidance and infrastructure planning focused not only on decarbonization but also on strengthening grid resilience, energy security, and industrial competitiveness.

On April 22, China’s two highest governing bodies—the CPC Central Committee and the State Council—jointly issued a set of “guiding opinions”[viii] on energy conservation and carbon reduction. The move marked one of the clearest high-level linkages to date between decarbonization efforts, energy security, and industrial development. A second binding directive issued the following day further strengthened environmental inspections of provincial governments and introduced new evaluation metrics tied to emissions reduction and coal consumption. For decades, economic growth has remained the central benchmark for the evaluation of local officials, often creating tensions between industrial expansion and environmental objectives despite Beijing’s growing focus on decarbonization. The incorporation of indicators including emission reductions, coal consumption controls, and investments in “new quality productive forces” marks a significant institutional shift in China’s governance priorities.