The armed conflict between Iran and Israel continues, raising concerns about oil supply. On the 16th (local time), Israel attacked a part of the South Pars gas field, one of Iran's largest gas fields in the world. Although there have been no attacks on oil facilities yet, projections suggest that if an attack occurs, China will be the greatest victim.
On the 17th, The Wall Street Journal (WSJ) reported, "Chinese refiners have become accustomed to importing Iranian crude oil at cheap prices that are subject to sanctions," noting that "if Iran's crude oil exports are disrupted, Chinese refiners will have to pay the full price for oil for the first time in years."
Iran exports about 1.7 million barrels of crude oil per day, which is less than 2% of global crude oil demand. However, China has a high dependency on Iranian crude. According to trade data firm Kep1er, currently, over 90% of Iran's crude oil exports head to China, and most of the Iranian crude is purchased by small and medium-sized refiners in Shandong.
Due to sanctions imposed by Western countries, most nations have refrained from handling Iranian crude oil. As a result, Iran has been distributing its crude oil through illegal channels at discounted prices. According to the WSJ, Iran has been transporting oil while keeping the transponder that transmits the ship's location signals turned off.
Chinese refiners have been importing Iranian crude oil since 2022 to gain profits. Tom Reed, vice president of Argus Media's China crude sector, stated that Iranian crude oil is about $2 cheaper per barrel than non-sanctioned Omani crude oil and that in 2023, the discount reached $11.
As the conflict between Iran and Israel escalates, a "red light" has been turned on for China's imports of Iranian crude oil. Major foreign media pointed out that other energy facilities in Iran are also at risk. Earlier, Homa Youn Palakhshahi, a senior oil analyst at the research firm Kpler, noted that "if Israel or the United States wishes to impact Iran's crude oil exports, there are clear targets that can be easily attacked," specifically mentioning "Karg Island."
Karg Island is a small coral island located in the northern Persian Gulf, and most of Iran's crude oil exports depart from tankers docked at Karg Island's port. The WSJ reported, "If Israel aims to change the Iranian regime, it will feel tempted to cut off the oil supply to Tehran," adding that if Israel strikes Karg Island, the majority of Iran's crude oil exports will be halted. If Israel actually attacks Karg Island, Chinese refiners will inevitably suffer losses.
If Chinese refiners cannot purchase Iranian crude oil, they will need to find alternatives, which could heighten tensions in the global crude oil market. The WSJ noted that an Israeli attack on Karg Island could shock the oil market and create friction with the U.S. White House, predicting that President Trump does not want American consumers to pay higher gasoline prices at the pump.