For decades, the Strait of Hormuz has been a narrow passage with a big footprint. Whenever it comes under tension, the world is reminded that energy security is less a policy construct than an everyday reality for Asia’s economies, factories and prices. For China, Japan, South Korea, India and Southeast Asia, it has always been more than just a Middle Eastern problem. It is an Asian economic issue.
This is why we should not interpret the latest Gulf tensions solely in terms of naval forces, sanctions and deterrence. Rather, it is a question of whether Asia can rely on a security regime in which oil supplies are vulnerable to political disruption and the world’s largest energy producers and consumers have little sway over escalation.
For China and the Gulf states, there should be a more ambitious energy deal: one that maintains a stable oil trade but eventually brings the cooperation focus back to renewables, storage, electric vehicles, industrial localisation and green finance.
China and the Arab world are ready for such a transition. In 2024, China-Arab trade reached US$407.4 billion, making China the Arab world’s largest trading partner. Last year, China’s trade with Arab League nations hit a record high of US$241.6 billion in the first seven months. No longer based solely on oil, China-Arab relations now include infrastructure, information technology, ports and logistics, manufacturing and even green energy.
Gulf states have incentive to speed up this shift. Saudi Arabia, the United Arab Emirates and others are looking to diversify their economies from oil, attract hi-tech manufacturing and position themselves for a future where oil and gas no longer underpin national development.
China is a key player in solar panels, batteries, electric vehicles and grid technologies. The International Energy Agency estimates global spending on electricity generation at US$1.5 trillion last year, some 50 per cent greater than investment in oil, natural gas and coal supply combined. This is a power shift in global energy.
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Can the Middle East war turbocharge China’s global EV ambitions?
