China's top leadership has vowed to implement more 'forceful' measures to strengthen energy security and bolster business confidence in response to mounting economic headwinds caused by the ongoing U.S.-Iran standoff in the Middle East [1]. The Politburo called for 'proactive fiscal support' to offset the negative impact of the conflict, which has led to volatility in commodity markets, particularly oil, and prompted Chinese refiners to reduce output due to fluctuating prices and rising supply risks [1].
Meanwhile, oil prices have surged, with Brent crude futures rising 1.96% to $120 a barrel and U.S. West Texas Intermediate (WTI) adding 0.2% to $107.09 on Thursday [2]. Brent crude had climbed about 6% the previous day, while WTI gained 7%, reaching their highest levels since mid-2022, according to LSEG data [2]. The price rally follows reports that U.S. President Donald Trump rejected Tehran's proposal to reopen the Strait of Hormuz, signaling that the U.S. naval blockade will remain until a broader nuclear agreement is reached [2]. Goldman Sachs estimates that exports through the Hormuz chokepoint have fallen to just 4% of normal levels, exacerbating supply tightness [2].
The Chinese government is expected to step up interventions, including fiscal stimulus and policies aimed at energy self-sufficiency, to mitigate the impact of the conflict [1]. Market analysis indicates that the war in Iran is pushing up China's solar exports to record highs as companies seek alternative energy solutions, and Chinese carmakers are advancing in AI and battery technology to diversify and enhance competitiveness [1]. Technical indicators point to increased volatility in energy and related sectors, with potential upside for solar and battery technology stocks if geopolitical tensions persist [1].
Goldman Sachs analysts noted that constrained Iranian exports and limited storage capacity could deepen supply disruptions if the blockade continues, while a boost to output from the UAE following its OPEC exit is expected to materialize gradually and not offset near-term tightness [2]. However, the bank also highlighted downside risks to demand, with global oil consumption in April estimated to be about 3.6 million barrels per day lower than February, particularly in jet fuel and petrochemical feedstocks [2].
CONCLUSION
The ongoing U.S.-Iran conflict has led to a sharp rise in oil prices and increased volatility in global energy markets, prompting China to pledge more aggressive economic support measures. While supply disruptions are expected to persist, analysts also caution about emerging demand risks, highlighting a complex and uncertain outlook for energy and related sectors.