China Faces Oil Crisis as Hormuz Strait Shutdown Threatens Economy

"Much of that oil... actually goes to China trying to get somewhere between... 15 per cent and 23 per cent of its seaborne oil comes from Iran, and that oil transits the Strait of Hormuz," said Gatestone Institute senior fellow Gordon Chang in an interview with Fox Business.

Fifty percent of China's imports flow through that Strait of Hormuz every day, another expert said.

The report said that Beijing has diversified supplies, but the loss of heavily discounted barrels comes at a vulnerable moment for factories dependent on cheaper energy.

Chang said ships are largely stalled north and south of the strait, through which discounted Iranian crude, vital for independent "teapot" refiners, typically moves.

"This will go through the system, and I suspect you will see real problems in about two months in China if this situation continues," Chang said.

The report warned that insurers are withdrawing, LNG shipments are disrupted and tanker traffic is effectively frozen, increasing the risk of a sharp oil price spike, particularly hitting the Chinese economy.

"About a third of the world's seaborne crude flows through that strait every day. Fifty per cent of China's imports flow through that strait every day. And right now, things are not going through the strait. If 10 million barrels goes missing or gets delayed for a week, there's no telling where the front end can go," the report cited Hayman Capital Management founder and CEO Kyle Bass said.

- IANS