The historic oil shock and surging fuel costs bolster the case for electric vehicles (EVs). EV makers in China are keen to capitalize on these developments.
The military actions involving the US and Israel against Iran have disrupted the supply of crucial fossil fuels emanating from the Middle East, propelling crude oil prices to $119 per barrel last week. This spike has fueled worries about soaring inflation or even a worldwide economic downturn.
However, these disruptions couldn’t have perfectly aligned with the fortunes of China’s EV sector. Despite China manufacturing and exporting more EVs than any other nation, its automakers are grappling with brutal price competition and slowing domestic growth. Chinese marques are increasingly under pressure to secure footing in alternative markets.
Now, we see Chinese EVs becoming more affordable concurrent with gasoline becoming more expensive. Analysts observe that this dual effect is likely to accelerate global industry expansion, particularly among Asian nations struggling with fuel shortages.
“Chinese brands have the potential to make a significant foray into Asia, driven by the rise in gasoline prices,” stated Tu Le, Managing Director at Sino Auto Insights, an automotive-focused consultancy. “I would expect them to fully exploit this opportunity.”
Even with escalating investments in renewable energy across Asia, the three-week conflict in the Middle East highlighted the region’s continuing reliance on imported oil. Roughly 60% of Asia’s oil transits from the Middle East via the Strait of Hormuz, where Iran has severely constrained shipping traffic.
In a recent publication, the energy think tank Ember identified EVs as the “biggest lever for cutting import bills,” estimating that EV adoption last year curtailed global crude oil consumption by 1.7 million barrels per day—comparable to about 70% of Iran’s exports in 2025.
Accelerated Adoption
Electric vehicles on the assembly line at a BYD plant in Zhengzhou, China, on November 5, 2025.
Electric vehicles on the assembly line at a BYD plant in Zhengzhou, China, on November 5, 2025. BQilai Shen/loomberg/Getty Images
Much as Russia’s invasion of Ukraine spurred renewable energy investments in Europe, analysts suggest the current oil crisis could serve as another pivotal moment for the clean energy industry in Asia.
“If it’s a single price jump amid low inflation, people might dismiss it,” commented Lauri Myllyvirta, Lead Analyst and Co-founder at the Centre for Research on Energy and Clean Air. “When a second one appears, it can be a ‘fool me twice’ moment that underscores the fact that prices are volatile, and driving a gasoline car simply leaves you exposed to them.”
In China, which sources over 40% of its oil from the Middle East, the pivot toward renewable energy has been validated. Possessing the world’s largest electricity generation capacity and the biggest sources of wind and solar power, China is better insulated from an energy crisis compared to other Asian nations.
Myllyvirta estimates that the proliferation of EVs in China—which constitute about 50% of new vehicle sales and roughly 12% of all registered vehicles—cut the country’s oil consumption by nearly 10% last year.
“From China’s perspective, this is precisely the scenario they had in mind when implementing their energy security strategy,” he remarked.
Zhu Zhaoi, Executive Director of the Middle East Studies Institute at Peking University HSBC Business School, posited that the oil crisis might expedite China’s existing clean energy aspirations—specifically hitting peak emissions by 2030 and achieving carbon neutrality by 2060.
“China’s leadership has seen this movie before. Every time instability flares up in the Middle East, it confirms the same lesson: dependence on imported fossil fuels is detrimental not only to the environment but represents a national security quandary,” stated Zhu.
EV Squeeze on Capacity
Domestic vehicles await loading onto a roll-on/roll-off vessel for export at Lianyungang Port, Lianyungang, China, on March 21, 2026.
Domestic vehicles await loading onto a roll-on/roll-off vessel for export at Lianyungang Port, Lianyungang, China, on March 21, 2026. Wang Chun/VCG/Getty Images
The state support that propelled China to global leadership in affordable EVs has simultaneously fostered an intense arena for domestic automakers, many now fighting for viability in an oversaturated market.
Consultancy AlixPartners projects that only about 15 of the 129 Chinese EV brands on the market in 2024 will remain financially sound by 2030. Analysts anticipate domestic demand to cool as the Chinese government gradually phases out EV adoption subsidies.
The recent surge in oil prices may offer automakers a much-needed domestic lift, but they still require overseas destinations to absorb the surplus supply.
“Even if higher oil prices help expand China’s EV market further, it won’t double it,” commented Yichao Zhang, an auto consultant at AlixPartners. “I don’t believe this immediately solves the issue of overcapacity.”
This excess capacity is unlikely to reach US consumers, where high tariffs effectively barricade Chinese EVs from the market to shield domestic manufacturers, including market leader Tesla. Earlier this year, US President Donald Trump appeared open to welcoming Chinese EV brands—but only if they established production facilities within the country.
But across Asia, nations are urgently seeking ways to curb energy consumption as fuel reserves dwindle. Some, like Thailand, the Philippines, and Vietnam, have advised citizens to work from home and imposed restrictions on air conditioning use. Vietnam’s leading EV manufacturer, VinFast, has also begun offering discounts on its electric cars and motorcycles following strikes against Iran.
Lam Pham, an Asian Energy Analyst at Ember, noted that Chinese EVs hold an advantage in most Asian areas due to price competitiveness, sophisticated battery technology, and an integrated supply chain.
“The increasing volatility in fuel costs, coupled with enhanced policy backing, means the Asian EV market is set for explosive growth. This expansion will benefit EV manufacturers across the board, especially those capable of rapidly scaling up and offering accessible models,” he concluded.
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