With oil prices surging and the conflict in the West Asia intensifying, the economic stakes for China are rising.
The cost of oil on Monday hit levels not seen in four years, one week after the United States and Israel launched an attack on Iran, an ally and financial partner to China. Fighting has halted virtually all traffic through the Strait of Hormuz, a critical passageway for China’s energy and goods.
China has a lot to lose in a widening conflict. In Iran, China found a cheap source of oil in recent years. Across the region, it found governments keen for its know-how in renewable energy and technology. China grew reliant, like much of the rest of the world, on the West Asia’s supply of both oil and gas.
The region’s importance to China became even more pronounced this past year, as the country’s trade rivalry with the United States escalated and it was unable to sell many goods to the US market, once China’s biggest market. The United Arab Emirates became the fastest-growing market for Chinese cars. Demand from Saudi Arabia and its neighbors for Chinese steel doubled. China’s exports to the West Asia grew nearly twice as fast as its exports to the rest of the world in 2025.
Chinese investment, too, is growing faster there than anywhere else in the world.
“The region is basically considered the biggest growth potential for China,” said Dan Wang, China director at Eurasia Group. From 2019 to 2024, China invested $89 billion directly into the West Asia, Ms. Wang said.
These trade ties are now in the line of fire as the American and Israeli militaries attack Iran, and Iran strikes back at ports, ships, pipelines, desalination plants, data centers and other critical infrastructure across the region. The seaborne transit of not only energy but goods carried on giant container ships through the Strait of Hormuz are imperiled.
China also has credit at risk, having extended loans for contracts and projects throughout the region.
The portion of China’s global portfolio of loans and grants to the region doubled to 10 percent in 2023, according to AidData, a research institute at William and Mary in Williamsburg, Va. State-owned financial institutions extended loans to oil refineries and seaports that finance the production and transport of commodities.
