Even though China is the biggest buyer of Iran’s oil exports, it has options if Israel attacks Iran’s oil business, The New York Times reports.

The bigger question — for the United States, China and other large consumers of oil — is how Iran would respond. If Iran were to block oil tanker traffic, Iran could potentially disrupt the 20% of the world’s oil that travels past its shores through the Strait of Hormuz.

Most of Organization of the Petroleum Exporting Countries’ five million barrels a day of oil exports from the countries on the Persian Gulf — Iran, Iraq, Saudi Arabia, Kuwait, and the United Arab Emirates — pass through the Strait of Hormuz into the Arabian Sea.

Saudi Arabia has tried to go around that strait by exporting from the Red Sea to its west, but attacks by Houthi rebels from Yemen have now made the Red Sea treacherous.

For China and other nations dependent on oil from the region, “it’s not so much what the impact of the strike is, but what is the impact of Iran’s response,” says Gabriel Collins, a researcher on China energy at Rice University in Houston.

“That’s the big concern from a global perspective,” says Michael Brown, a commodities specialist in the London office of Australian brokerage Pepperstone.

President Biden said Thursday the United States was “in discussion” about the possibility that Israel might strike Iran’s oil sector. Following Biden’s remarks, West Texas Intermediate, the U.S. oil benchmark, surged by 5.5%.

The sudden spike highlighted the market’s sensitivity to geopolitical developments. Oil prices extended their gains Monday, with Brent nearing $80 to build on last week's steepest weekly jump since early 2023.

The next big question is how a strike to its oil production would impact Iran. While most countries shun Iran’s oil because of international sanctions on Tehran, China purchases 90% of Iranian oil exports and supplies a vital source of funds to Iran, worth $2 billion a month.

These funds bankroll Iran’s government and equips it with the funds to pay for its own exports.

For its part, China would be able to weather any disruption to the oil industry in Iran since it has diversified its energy consumption beyond oil and gas to electric and hybrid cars powered by coal, as well as solar and wind energy. Today, oil comprises only 20% of China’s energy supply, whereas it’s 40% of energy used in the United States, according to Collins.

While China is the world’s biggest importer of oil and the second-biggest user of oil behind the United States, Iran supplies only 15% of China’s oil imports, according to Iran energy export expert Andon Pavlov at Kpler in Vienna. China sources a large quantity of its oil from Russia, Kuwait, Saudi Arabia, UAE and Angola.

On top of this, China has been building up its oil reserves in the past several years, and now has about three’ months of oil imports on hand. This is the equivalent of two years of its oil imports from Iran.

“Any interruptions to Iranian oil exports would probably be quickly replaced with increases in China’s other sources of supply,” says Roger Fouquet, a specialist in energy at the National University of Singapore.

Alex Turnbull, a commodities analyst in Singapore, adds: “If it’s 30 days of madness, China would glide over that like it’s a speed bump.”