The Strait of Hormuz, a narrow waterway 29 nautical miles wide at its narrowest point, is one of the world's most critical oil chokepoints. However, its disruption has revealed an unexpected trend: China, Iran's largest oil buyer, is purchasing significantly less crude. 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.
A Surprising Slowdown in Chinese Imports
This 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 Strait of Hormuz. The strait handles roughly a quarter of global seaborne oil trade, linking the Persian Gulf with the Arabian Sea. Countries like Iran, Iraq, Kuwait, Qatar, and Bahrain rely heavily on it for exports, while Asian economies remain among its biggest customers.
Global Energy Implications
With limited alternative routes, any disruption to traffic through Hormuz can have immediate consequences for global energy supplies and oil prices. The conflict in the Middle East that began on February 28 sent shockwaves through energy markets, with Brent crude surging from around $70 per barrel to above $125 at its peak. Although prices have since eased, crude has largely remained elevated between $90 and $100 a barrel.
China's Imports Hit a Decade Low
Instead of rushing to buy more oil, China cut purchases. According to Kpler, China's seaborne crude imports dropped to around 6.7 million barrels a day in May, the lowest level in nearly a decade. The country imported an average of about 10.4 million barrels a day throughout 2025 before the conflict. Ship-tracking firm Vortexa estimated imports at between 7 million and 7.5 million barrels a day, still significantly below normal levels.
Stockpile Usage and Refinery Cuts
One reason China has been able to reduce imports is its massive oil stockpile. According to Reuters, China has accumulated enormous strategic and commercial reserves over the years, with combined inventories estimated to exceed 1.2 billion barrels. Analysts estimate Chinese refiners have been drawing down inventories at roughly 1 million barrels per day in recent weeks to compensate for lower imports. China's strategic petroleum reserves alone are believed to have increased by around 8 million barrels since the conflict began, according to Kpler estimates.
State-owned and private refiners have sharply reduced processing rates as profit margins deteriorated and demand weakened. According to Kpler and Energy Aspects, refinery throughput in May and June is expected to remain around 13 million barrels a day, compared with an average of 14.8 million barrels a day last year. China Petrochemical Group and independent "teapot" refiners have led the cutbacks.
Electric Vehicles Changing the Equation
China's rapid adoption of electric vehicles is 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 during this crisis. The rapid adoption of EVs has contributed to a drop of about one million barrels a day in fuel demand this quarter. Government data showed EV charging activity on highways during the May Day holiday surged more than 55% compared with a year earlier, with nearly one-quarter of vehicles on Chinese highways being electric. Rail travel increased while international air travel weakened, reducing oil demand through changing consumer behavior rather than rationing.
Iranian Crude Still Attractive Despite Discounts
Despite reducing imports, China remains Iran's most important oil customer. Iran routinely sells oil to China at substantial discounts because of Western sanctions, often trading $8-$10 per barrel below competing grades. In 2025, China imported nearly 1.4 million barrels of Iranian oil per day, accounting for roughly 12% of total Chinese crude imports. However, imports from Iran fell to around 1.1 million barrels a day in May, the lowest level since January 2025, according to Kpler.
Iranian suppliers have recently offered even deeper discounts to attract buyers. Traders said Iranian Light crude for July delivery was offered at discounts of up to $1 per barrel against Brent benchmarks, compared with premiums only weeks earlier. Russian crude has also become cheaper, with prices for Russia's ESPO blend falling to premiums of around $3-$4 per barrel over Brent, down from roughly $6 previously.
The Shadow Fleet 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. 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.
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. He noted that China was building a strategic petroleum reserve, stopped building, and is now releasing some from their reserves. They have turned down their refineries, producing less products. This is in response to a crisis, 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 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.
What Happens Next?
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. However, government authorization, subject to Beijing's outlook on Hormuz, will be needed before sizeable buying returns. For now, 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. The result is a rare situation in which the world's largest oil importer is helping stabilize global energy markets by buying less oil, even as one of its most important suppliers, Iran, faces its biggest energy crisis in years.
