China Is the Big Winner of the Iran Ceasefire

Exactly what is going on between the United States, the Gulf States, Israel, and Iran is legitimately unclear. While the U.S. and Iran have said they agreed to a Pakistan-broked ceasefire and want to reach a permanent agreement to end the war, there have been reported strikes in Lebanon, Iran, and several Gulf States. The Speaker of the Iranian parliament, Mohammad-Bagher Ghalibaf, has accused the United States of violating “three key clauses” of the “framework” the country says the U.S. has agreed to, while Iranian media said earlier today that tankers were halted from passing through the Strait of Hormuz — which has, in theory, reopened — due to Israeli strikes on Lebanon.

While the outcome of planned negotiations between the United States and Iran over the two-week ceasefire announced Tuesday evening remains anybody’s guess, we can start to evaluate which industries, countries, and regions stand to benefit from the new era inaugurated the war, and which stand to suffer.

Winners

China

China’s neighbors got a crash course in the dangers of fossil fuel dependence for their essential energy needs. The vast majority of oil and gas that generally flows out of the strait is bound for Asia, leaving countries to embrace some mix of rationing, higher costs, and finding new supplies.

Going forward, these Asian countries may want to reduce their fossil fuel import bill, either by developing solar power and storage to replace gas-fired electricity generation or by expanding electrification to reduce reliance on gasoline (or both!). No matter what path they pick, it will likely be Chinese companies selling the solar panels, batteries, and electric vehicles necessary to traverse it.

China itself, despite its heavy use of Persian Gulf petroleum, was able to weather the crisis far better than its neighbors. While the country is the world’s largest consumer of fossil fuels, it has spent decades preparing for this type of crisis, building up the world’s largest oil stockpiles and an electric grid that largely relies on its own coal, as well as nuclear, renewables, and hydropower.

The nuclear power industry

The nuclear industry has often flourished in response to crises in the oil markets. Much of the Japanese, French, and American nuclear buildouts occurred in the wake of the 1970s oil shocks. Already, the Hormuz shock has revived Asian nuclear power. Taiwan shut down its last operating nuclear reactor last year, but already the utility Taipower has applied to restart a nuclear plant. Vietnam and Russia signed a deal to develop Southeast Asia’s first operational nuclear power plant, while the South Korean government announced plans to accelerate the restart of several reactors.

Coal miners

While in the long run the Hormuz crisis could spur Asian economies to embrace nuclear, storage, renewables, and electrification, in the short run they need to keep the lights on. Capacity limits on coal-fired power plants have been lifted across Asia, and prices for coal have risen accordingly. And while Taiwan for example, is reembracing nuclear power, it’s also looking to boost its coal output.

When the consulting firm Wood Mackenzie modeled the effects through 2050 of a “a major geopolitical escalation beginning in early 2026 [Editor’s note: wink wink], disrupting 15–20% of global oil and LNG supply,” the analysts found that “coal plays a larger role in the near term as countries respond to supply shocks by maximising domestic energy sources and delaying plant retirements.”

(“Over the longer term,” the report continued, “nuclear expands significantly, providing stable, fuel-secure baseload power as new capacity comes online from the 2030s.”)

As national governments get more concerned about energy security and reliance on fuels that come through geopolitically sensitive chokepoints, major coal exporters like Australia, Indonesia, and South Africa stand to benefit. And even if countries pursue electrification in order to get off of oil, this can still benefit coal exporters, at least in the short to medium term.

American oil companies

The shale revolution has birthed a diverse, sprawling ecosystem of independent exploration and production companies that can cover their operating expenses when oil prices are below $50 and profitably drill new wells at $70. If global oil prices are permanently higher due to tolling in the Strait of Hormuz, as well as due to hundreds of millions of barrels of shut-in production never reaching the market, then these companies are likely to see permanently higher profits.

Even if oil prices fall substantially as the crisis subsides, these producers have likely experienced the past six or so weeks as a pure profit-taking opportunity, with anxious investors keeping the leash on new exploration. And if the crisis continues and the strait continues to be closed, they can either profit from their existing operations or choose to profitably drill new wells.

Losers

Liquified natural gas

As long as the Strait of Hormuz remained closed, about a fifth of the world’s LNG supply wasn’t reaching its largely Asian customers. Even if the strait fully reopens, Qatar’s Ras Laffan LNG facility has sustained damage that will take years to fix. While this supply shock will mean higher spot prices for other LNG exporters — most notably the United States — future LNG investment will likely be chilled by this reminder of the fuel’s essential geopolitical instability.

Even if LNG flows resume for the duration of the shaky planned ceasefire, analysts at BloombergNEF estimate that “the combined loss of supply could remove roughly 16 million tons” of LNG from the market this summer. (Qatar’s total LNG capacity is 77 million tons per year.) “Hormuz crossings remain the critical variable driving prices in the coming days. If vessel transits accelerate, the market will price in improving availability. If crossings stall, risk premiums will rebuild quickly, reinforcing the view that even a ceasefire is insufficient to restore reliable Hormuz transit,” BNEF analysts wrote in a note Wednesday.

Already, the Vietnamese conglomerate Vingroup has proposed scrapping a planned LNG import project and replacing it with renewables and batteries. Chinese LNG imports already dropped in 2025, indicating that the Asian growth the LNG industry was counting on may not end up redounding to its benefit.

Gulf oil producers

The Gulf states are supposed to be the central players in the world oil market. They can produce oil cheaply at scale, and Saudi Arabia especially is considered the world’s “swing” producer, able to ramp up and ramp down oil production to respond to market conditions

Now, no matter what happens in the Strait of Hormuz, hundreds of millions of barrels of oil have been shut-in and won’t reach global markets. Gulf states will likely have to embark on expensive pipeline projects to lessen their dependence on the strait, and their ability to diversify their economies by attracting tourism or high-end service industries may be permanently imperiled by six weeks of drone and missile assaults from Iran.

The necessary reconstruction may also pull capital away from their Gulf producers’ high-profile overseas investment projects, whether in movie studios or green energy, forcing these states to be more insular and less ambitious in forging overseas economic and political links that were supposed to keep them safe.

And while a higher floor on oil prices may help refill these states’ coffers, to the extent that Asian economies electrify in response to the Hormuz shock, it could mean that oil demand begins falling faster than expected.

The West Coast and Hawaii

While the United States has not been wholly insulated from the war’s economic effects — gas prices have risen dramatically — it has managed to benefit from oil exports and its electricity sector has been largely unaffected thanks to natural gas prices staying basically unchanged since the war began.

The story is different on the West Coast and in Hawaii. California is essentially the furthest east section of the Asian energy complex, meaning that its refineries and gas stations have had to compete for scarce supplies of oil and gasoline thanks to the closure of the Strait of Hormuz. Meanwhile Hawaii, which depends on oil for the bulk of its electricity generation, will soon see price hikes.

Even if traffic is restored through the strait, the shockwaves from its closure will still hit the United States’s westernmost points.