Gatestone Institute senior fellow Gordon Chang joins ‘Mornings with Maria’ to break down the impact of escalating US-Iran tensions on global oil markets and China’s dependence on Middle Eastern energy.
With traffic in the Strait of Hormuz at a near standstill, China’s dependence on Iranian oil could lead to “real problems” within two months if the crisis continues, an expert has warned.
OIL PRICES RISE AFTER STRIKES KILL IRAN’S SUPREME LEADER, TANKERS ARE NEAR STRAITS OF HORMUZ
Oil tanker in a port in the Strait of Hormuz. (Giuseppe CacaceI/AFP via Getty Images)
Chang noted that a significant portion of China’s competitively priced Iranian crude, vital for its independent “teapot refineries,” typically passes through the narrow waterway, where ships are now largely stranded north and south of the Strait.
“A lot of that oil… actually goes to China in an attempt to get somewhere between… 15% and 23% of Iran’s marine oil, and that oil goes through the Strait of Hormuz,” Chang said.
He added that while Beijing has diversified supplies, the loss of deeply discounted barrels comes at a vulnerable time for factories that rely on cheaper energy.
“This will go through the system, and I suspect you will see real problems in China in about two months if this situation continues,” Chang said.
Hayman Capital Management founder and CEO Kyle Bass analyzes the global oil market as tensions escalate in the Middle East on “Mornings with Maria.”
OIL MARKETS ON THE EDGE AS IRAN MOVES TO RESTRICT KEY STRAIT OF HORMUZ SHIPPING, SAYS REPORT
Bass pointed to the insurance pullback and the strategic weight of the bottleneck, warning that even a temporary disruption could send crude oil prices sharply higher at the start of the month.
“About a third of the world’s crude oil flows through this strait every day. Fifty percent of China’s imports pass through that strait every day. And right now it’s not going through this strait,” Bass said.
“If 10 million barrels go missing or are delayed by a week, there’s no telling where the front end will go,” Bass added.
With insurers pulling out, LNG shipments disrupted and tanker traffic effectively frozen, the crisis underlines how an eight-kilometer-wide passage could shape the economic trajectory of the world’s second-largest economy.
“We’re at risk of a pretty big oil price spike here,” Bass said.
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