The war that broke out between the United States, Israel and Iran on February 28 was not just an ordinary episode of tension in the Middle East.
It opened the curtain on a larger reality that the world today still revolves around oil.
A planned attack by Washington and Tel Aviv on hundreds of targets in Iran, including military and nuclear facilities, was immediately retaliated by Tehran with missiles at military bases in the Gulf countries.
Officially, the action was described as an effort to contain Iran's nuclear threat and limit its influence in the region.
However, if we delve deeper, this conflict cannot be understood only through the lens of security or ideology. It is closely related to energy security and great power competition, especially between the United States and China.
In a world that is still heavily dependent on fossil fuels, every missile launched near an oil well carries echoes to the international financial markets.
Iran's Role in the Oil Market
Iran is among the owners of the world's largest oil reserves and still produces millions of barrels a day despite Western sanctions.
The country produces about 3.4 million barrels of oil per day, equivalent to 3% of the world’s supply. Most of Iran’s oil passes through the Strait of Hormuz, a strategic route that handles about 30% of global seaborne oil trade.
By 2024, oil flows through the strait will reach 20 million barrels per day, worth nearly $500 billion annually.
Geopolitical tensions have pushed oil prices higher, with Brent above $72 a barrel, and already above $100 due to the escalating conflict.
China a Major Buyer of Iranian Oil
The energy relationship between China and Iran is growing stronger, with China becoming the major buyer of Iranian oil. Its purchases have increased from 25% in 2017 to almost 90% in 2023.
Most of this oil is bought by independent ‘teapot’ refiners in Shandong, which are attracted by the discounted prices despite the low profit margins.
By 2025, more than 80% of Iran’s oil exports will go to China, at around 1.38 million barrels per day. If Iran is disrupted, China's energy supply will be affected and the global oil market could be disrupted.
China may be forced to seek more expensive alternative sources.
The loss of discounted Iranian oil could increase China's daily import costs by around $13 to $18 million, putting pressure on its economy and energy security.
US vs China: The Silent Battle for Global Energy Market Dominance
For the United States, energy security has returned to the forefront, especially under Donald Trump's administration through an 'energy dominance' strategy that emphasizes fossil fuels and critical minerals to strengthen global influence.
This approach involves reducing regulations and withdrawing support for renewable energy, thus elevating conventional energy as an instrument of economic and geopolitical power.
At the same time, the US military presence in the Gulf remains strong to protect global energy flows, especially in strategic routes such as the Strait of Hormuz.
China, on the other hand, has taken an economic approach by maintaining relations with Iran to secure cheap oil supplies.
However, this dependence leaves China vulnerable and any conflict could force Beijing to seek more expensive alternative sources, increasing import costs and inflationary pressures, thus highlighting the strategic competition between the US and China for control of global energy markets.
Oil Shapes a New Era of Geopolitics
While Donald Trump has portrayed the US-Israeli military campaign against Iran as an effort to contain the nuclear threat, the conflict is actually broader than that.
It is also closely linked to the struggle for energy security and global great power competition.
These tensions show that the world’s energy transition is far from mature.
As long as strategic decisions depend on the fossil fuel supply chain, climate goals will remain vulnerable to geopolitical risks.
This crisis is not just a regional security issue, but reflects systemic tensions in the global energy system, where oil dependence, climate vulnerability, and global power competition are intertwined and increasingly unpredictable.
