The trajectory of global oil prices will increasingly hinge on China’s oil demand, analysts say, as the country’s purchasing decisions exert considerable influence on the market amid ongoing geopolitical tensions in the Persian Gulf.

China, the world’s largest oil importer, significantly curtailed its oil purchases this spring, reducing demand enough to prevent a steeper rise in global prices despite disruptions caused by the conflict between the United States and Iran, which has slowed tanker traffic through the Strait of Hormuz. Observers are now closely monitoring when China will ramp up its oil imports again, with the length of the pause expected to impact whether prices fall further or begin to rise.

“Where Chinese demand goes is really the most important piece of the puzzle,” said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy. The International Energy Agency (IEA) has recently noted signs of renewed buying interest from China, citing procurement activity and one-off tanker arrivals.

Data released by Beijing show that China’s oil imports dropped nearly 30 percent compared to the previous year as of May, although the reasons behind the steep decline remain unclear. Unlike previous periods of import reduction, China does not appear to have drastically drawn down its strategic oil reserves, nor have refinery slowdowns or export bans fully accounted for the decrease. Analysts point to other factors, such as increased use of domestic coal for chemical production, growth in renewable energy, a large electric vehicle market, and an extensive high-speed rail network, which together reduce oil consumption.

The IEA has projected that 2023 could mark the first significant annual decline in China’s oil consumption since the 1970s and 1980s oil crises. Ben Cahill, a senior fellow at the Atlantic Council, highlighted China’s substantial stockpiles of crude oil, suggesting the country faces no immediate pressure to restore import volumes. “They’re not under any immediate pressure at all,” Cahill said.

China’s market influence is notable given its heavy reliance on imported oil, contrasting with historical trends where producers, particularly members of the Organization of the Petroleum Exporting Countries (OPEC), dominated price dynamics. However, shifts in global supply, including expanded U.S. oil production and recent changes within OPEC—such as the departure of the United Arab Emirates from the cartel—have eroded OPEC’s dominance. Gregory Brew of the Eurasia Group emphasized China’s expanding leverage, stating the country “effectively operates more market power than any nation on Earth, including Saudi Arabia and the United States.”

Meanwhile, tensions in the Persian Gulf remain a critical factor for oil markets. The conflict between the United States and Iran has impacted tanker movements through the Strait of Hormuz, a vital chokepoint for global oil shipments. The U.S. has asserted control over navigation in the strait, with President Donald Trump declaring the United States as “THE GUARDIAN OF THE HORMUZ STRAIT” and initially proposing to charge ships fees for transit. Although the fee plan was quickly abandoned in favor of guaranteed safe passage for vessels from Gulf states willing to invest in the U.S., Washington continues to escort ships along safer routes near Oman.

Since early May, the U.S. military has provided escort services facilitating the movement of hundreds of millions of barrels of crude through the strait, according to U.S. Central Command. These efforts, alongside China’s cautious approach to oil imports, will play significant roles in shaping the direction of global oil prices in the coming months.