Iran war accelerates global shift toward China-led energy future

08:20

By: Dakir Madiha

Iran war accelerates global shift toward China-led energy future

The war in Iran and disruptions to oil and gas flows through the Strait of Hormuz are reshaping global energy markets, with China positioned to benefit most. In a Substack post published on April 13, Paul Krugman warned that rising geopolitical tensions are pushing energy-dependent economies away from the United States and closer to China. He argued that the conflict is accelerating an already ongoing transition toward electrification, a sector where China holds a dominant position.

Krugman said the surge in oil and gas prices, combined with supply risks, has exposed the structural weaknesses of fossil fuel dependence. He noted that the shift toward a China-led energy system could arrive faster than expected as the crisis deepens. The disruption of critical shipping routes has intensified concerns over energy security and reinforced the urgency of moving toward more stable and domestically controlled energy sources.

China’s advantage extends across the entire clean energy supply chain. The country controls about 80 percent of global solar panel production and more than 70 percent of electric vehicle battery manufacturing. It also produced around 12.4 million electric vehicles in 2024, accounting for over 70 percent of global output. According to Reuters data, China’s clean technology exports rose more than 20 percent in 2025 to reach approximately 222 billion dollars, with battery exports generating 82 billion and electric vehicles close to 70 billion. Shipments of electric vehicles alone increased by 43 percent year on year, reaching more than 150 countries.

The momentum has continued into 2026. In the first two months of the year, China exported 670,000 new energy vehicles, an 88 percent increase compared with the same period in 2025. Lithium-ion battery exports reached 14.2 billion dollars, up 46 percent. These figures reinforce China’s position as the leading supplier of technologies critical to the global energy transition.

Governments worldwide are reassessing their reliance on imported fossil fuels. International Energy Agency chief Fatih Birol said the conflict would accelerate renewable energy adoption, describing clean energy as a domestic resource that reduces exposure to volatile global markets. Data from the International Renewable Energy Agency shows renewables accounted for 85.6 percent of new power capacity in 2025, with clean sources now representing 49.4 percent of global installed capacity.

Political shifts in the United States are widening the gap. Policies under Donald Trump aimed at boosting fossil fuels and rolling back clean energy incentives have created uncertainty for long-term industrial planning. Although renewable electricity reached a record 26 percent of US generation in 2025, analysts say policy reversals tied to election cycles limit the country’s ability to compete with China’s coordinated industrial strategy. Experts argue that China remains the most cost-effective and comprehensive supplier of electrification technologies, strengthening its influence over the future energy system.