Has China really ‘won’ in the Iran war? 

Even before the dust has fully settled on the US-Iran war, observers are already pulling out their ledgers to calculate the geopolitical tally, arriving at a striking conclusion: China is the greatest winner. Shielded by massive strategic oil reserves and bolstered by a booming renewable energy sector, Beijing appears to have weathered the initial energy shock better than its regional peers. 

Furthermore, the crisis accelerated the global clean energy buildout, leading to a surge in China’s green technology exports; notably, electric vehicle shipments soared by more than 110% in May, and solar exports increased by 60% in April, according to data highlighted by the Asia Group.

‘Alternative balancer’ means more responsibility

Yet this superficial “winner” narrative obscures a profound and complex geopolitical shift currently unfolding. For the Gulf states, widely considered the main losers of the war who bore the heaviest economic costs, the conflict has triggered an unprecedented strategic recalibration. 

Frustrated by the limitations of American military deterrence yet unable to replace its security umbrella, Gulf capitals are accelerating a broader strategy of strategic diversification. While efforts to mitigate the vulnerabilities of a heavily US-centric security architecture do not automatically equate to a wholesale pivot to Beijing, China has undoubtedly emerged as one of the most compelling alternative options within this wider hedging effort.

However, operating as an “alternative balancer” in the Gulf brings considerable new responsibilities. As China’s economic and technological footprint in the region expands, Beijing is entering a more demanding phase of geopolitical engagement. It is transitioning from a predominantly economic actor benefiting from the established maritime security framework into a key stakeholder that must now navigate the very eye of the Middle Eastern storm. The real question is no longer whether China won the war, but how it will manage the structural risks and hidden costs of this fragile transition.

Strategic hedging in a fragmented Gulf

The Sunni Arab Gulf states bore the brunt of the conflict’s regional spillover, absorbing direct Iranian strikes on their territory and shipping lanes. This violence severely undermined the stability that has anchored decades of economic growth. 

Furthermore, the US-Israeli military campaign failed to dismantle Tehran’s nuclear and missile capabilities, exposing a sobering reality: Western military force could not neutralise the Iranian threat, yet the disproportionate costs of the confrontation were borne almost entirely by the Arabian peninsula.

This stark vulnerability has accelerated a longstanding drive towards strategic autonomy. The crisis laid bare the limitations of American protection and consultation, as regional leaders were largely excluded from critical decisions regarding escalation dynamics and suffered retaliatory damage despite their established security partnerships with Washington.

Amid the collapse of the recent ceasefire and the persistent threat of renewed escalation, Gulf capitals are actively diversifying their security options by exploring closer ties with European partners, boosting local defence industries and hedging with Asian powers. However, external actors must discard the illusion of a unified Gulf Cooperation Council (GCC). The underlying architecture of the region is, in fact, revealing increasingly divergent strategic calculations.

On one end of the spectrum, the United Arab Emirates, driven by visceral frustration over Iran’s escalations, is doubling down on its integration with Washington and Jerusalem. On the opposite end, Oman is articulating a clear departure from the US-led status quo. In an op-ed for the French outlet Le Monde, Omani Foreign Minister Badr al-Busaidi publicly declared the 45-year-old American “containment” policy against Iran a myth and a strategic failure, bluntly identifying Tel Aviv — not Tehran — as the primary threat to Gulf security.

While internal frictions are certainly not new to the GCC, this explicit rejection of the old containment highlights a notable shift in Gulf security discourse. By calling for an inclusive architecture that integrates Iran and Iraq, Oman is not necessarily signalling the abrupt collapse of the old regional order, but it is undoubtedly accelerating its fragmentation.

Between these poles lies Saudi Arabia, demonstrating the masterclass of strategic hedging. The recent landmark US-Saudi civilian nuclear cooperation agreement highlights this dynamic. By maintaining active dialogue with Beijing and Moscow over nuclear technology, Riyadh effectively leveraged China’s growing presence as a bargaining chip to extract unprecedented nuclear concessions from Washington, securing technology access without yielding to immediate normalisation with Israel.

This manoeuvre illustrates why Gulf engagement with Beijing should not be viewed through a simplistic binary lens. Gulf capitals are neither staging a wholesale pivot to Beijing nor simply reverting to traditional US reliance. Instead, China serves a dual purpose: a crucial economic and technological anchor in its own right, and a primary diplomatic counterweight that grants the Gulf unprecedented leverage to extract concessions from Western powers.

A two-way capital fusion

Beyond state-level security calculations, this drive for diversification is also reshaping the private sector. The “pivot to the East” is no longer solely defined by state-to-state oil exports; it is evolving into a complex, two-way transfer of capital and technology. China is increasingly seen by wealthy Gulf families not just as a conventional trading partner, but as a strategic hub for education, innovation and wealth diversification in a rapidly changing global landscape. 

Simultaneously, this socioeconomic fusion is anchored by massive Chinese capital flowing in the opposite direction. According to a recent Moody’s report, the Gulf region has become a core destination for China’s overseas infrastructure and energy transition investments. Even prior to the recent escalations, China’s cumulative investment in the UAE and Saudi Arabia had reached US$9.5 billion and US$4 billion, respectively. Driven by the region’s ambitious diversification plans, Chinese institutions are pouring capital into Gulf ports, utilities, renewable energy and battery storage.

This macro-level shift is palpable on the ground. In my recent conversations with Chinese entrepreneurs operating in the Middle East following the outbreak of the war, a fascinating dichotomy emerged. Those in the financial, investment, and venture capital sectors remain active in the Gulf. For them, the region’s geopolitical recalibration is not a deterrent, but an unprecedented opportunity. They operate on a mindset best described by a popular Chinese business adage: “The greater the storm, the bigger the fish catch (风浪越大鱼越大).” As Gulf capital seeks to diversify away from Western volatility, Chinese financial architects are eager to build the new conduits for this wealth.

The limits of China's advantage

This financial optimism, coupled with Beijing’s growing leverage in the energy sector, lends credence to the narrative characterising China as a primary beneficiary of the Hormuz crisis. This influence was evident when global oil prices stabilised near pre-war levels, defying forecasts of a surge despite five months of conflict disrupting the Strait of Hormuz. This stability is largely attributable to Beijing’s strategic demand management. By sharply reducing crude imports to decade lows, curbing fuel exports and accelerating its electric vehicle transition, China effectively eased global market pressures.

Meanwhile, the competition among oil producers has transformed China from a mere importer into a decisive market maker. As the Gulf fractures and external suppliers like Russia and Iran compete for Asian market share, producers have fallen into a trap where they must lower prices and offer deeper discounts to defend their position. Ultimately, the more fragmented these energy suppliers become, the stronger Beijing’s bargaining power grows, allowing it to secure cheaper oil and more favourable contracts. 

However, this energy-centric optimism does not extend across the broader economy. For Chinese businesses dealing in physical goods, the reality is notably different. Entrepreneurs engaged in the real economy, including manufacturing, trade and hardware deployment, are adopting a cautious approach. They frame their predicament using another aquatic Chinese idiom, this time denoting collateral damage: “When the city gate catches fire, the fish in the moat suffer (城门失火，殃及池鱼).” Ultimately, the calculus of geopolitical gains and losses depends entirely on one’s position: whether you are the fisherman on the open sea, or the collateral fish in the moat.

This vulnerability within the real economy exposes the limits of the broader winner narrative. While Beijing’s newfound leverage in energy pricing and its expanding renewable capacity serve as crucial shock absorbers, buffering a shock is not the same as immunity. As the world’s largest trading nation, China remains tethered to the physical flow of goods. Consequently, maritime disruptions, soaring freight rates and skyrocketing insurance premiums have inflicted severe secondary costs on Chinese exporters.

The most tangible manifestation of this collateral damage is unfolding in the Strait of Hormuz, but the shockwaves extend far beyond it. For decades, the global economy relied on the assumption of free navigation through this vital maritime chokepoint under the US security umbrella. The war has created a new normal in the region, potentially driving a paradigm shift that rewrites the rules of maritime transit. 

Crucially, this is no longer just a localised chokepoint issue; it is a systemic reshaping of the broader strategic and logistical architecture connecting the Gulf to the Northwestern Indian Ocean, the Red Sea and the Bab-el-Mandab Strait. The latest developments vividly illustrate this cascading crisis. With Hormuz compromised, Saudi Arabia increasingly relied on its East-West pipeline to export crude via the Red Sea port of Yanbu. However, Houthi attacks are now forcing Asia-bound supertankers to abandon this route. Rerouting these vessels around Africa extends journey times by up to a month and adds millions in fuel costs to every shipment.

This escalating “geopolitical tax” will inevitably be passed down the global supply chain. Fundamentally, nations like China, whose economic lifelines are reliant on these vital sea lanes and whose broader Indian Ocean strategies are vulnerable to such bottlenecks, are inevitably forced to foot the bill.

Balancing expectations

In a conflict with global reverberations of this magnitude, there are ultimately no true victors. The assertion that China has emerged as the “winner” of the Iran war is not only an illusion based on short-term economic data, but it also fundamentally misreads Beijing’s own strategic calculus. China’s regional vision is inherently long-term; it actively rejects being boxed into the simplistic, binary geopolitical camps of “winners” and “losers”.

As the war transitions into a gruelling diplomatic slog, the Gulf is undergoing three simultaneous structural shifts: a push for military self-reliance that recalibrates ties with the US; a diplomatic shift from isolating Iran to seeking a fraught, inclusive containment; and an economic drive to build resilient, diversified infrastructure that bypasses the chokehold of the Strait of Hormuz.

This triple transition presents an unprecedented test for Beijing. Regardless of China’s persistent desire to remain an unentangled economic partner, Gulf states view external powers through an increasingly pragmatic lens. They do not necessarily expect Beijing to provide a traditional security umbrella, but they do expect the region’s largest economic beneficiary to leverage its diplomatic and economic weight to help anchor regional stability.

The real test for Beijing is managing this nuanced expectation. It faces the delicate task of addressing the Middle East’s call for a more proactive stakeholder and securing its fragile supply chains without becoming ensnared in regional quagmires. While Beijing has yet to articulate a definitive roadmap for navigating this dilemma, its current approach centres on offering a model of developmental peace. It responds to Gulf demands for deeper involvement by elevating diplomatic mediation and expanding multilateral frameworks, most notably within the BRICS architecture. By providing deep socioeconomic fusion and diplomatic prestige, Beijing aims to satisfy the Gulf’s desire for a multipolar order while rigorously safeguarding its own non-interventionist red lines.

Ultimately, the geopolitical storm in the Middle East has not passed; it has merely entered a more complex, structural phase. How China calibrates its response to this shifting architecture will define its strategic trajectory in the region for decades to come.

Related: How Trump’s Iran war boosted Beijing | Unravelled: How the Iran war triggers a global realignment