Erratic Fuel Prices Due to War, Chinese EVs Could Reap the Benefits
Erratic Fuel Prices Due to War, Chinese EVs Could Reap the Benefits
Jakarta, CNBC Indonesia - The historic oil market shock and current surge in fuel prices are creating a new momentum for the transition to electric vehicles (EVs). This situation is being enthusiastically welcomed by Chinese EV producers, who are now eager to meet global market demand.
The war involving the United States (US) and Israel against Iran has disrupted critical fossil fuel supplies from the Middle East on Wednesday (25/03/2026). This has driven crude oil prices to soar to US$119 per barrel last week, triggering concerns over worsening inflation and a potential global recession.
However, this turmoil has come at a “very opportune” time for China’s EV industry. Although China produces and exports more electric cars than any other country, its automakers are facing fierce price competition and slowing growth in the domestic market, putting Chinese brands under significant pressure to seek alternative markets.
Analysts state that as Chinese EVs become cheaper and petrol prices more expensive, this combination is likely to extraordinarily accelerate the global expansion of the industry. This is predicted to occur particularly in Asian countries bearing the heaviest burden from fuel shortages.
Managing Director of Sino Auto Insights, Tu Le, said there is potential for Chinese brands to make significant breakthroughs into Asia amid high petrol costs. He emphasised that he expects them to fully capitalise on the situation.
Although investments in renewables in Asia continue to rise, the three-week conflict in the Middle East has highlighted the region’s dependence on oil imports. Around 60% of Asia’s crude oil supply comes from the Middle East via the Strait of Hormuz, where Iran has tightly restricted cargo flows.
In its latest report, the energy think tank Ember describes EVs as the biggest lever for cutting import bills. The institution estimates that EV usage last year reduced global crude oil consumption by 1.7 million barrels per day, or about 70% of Iran’s exports in 2025.
Analysts assess that the current oil crisis could serve as another turning point for Asia’s clean energy industry, similar to how Russia’s invasion of Ukraine spurred renewable energy investments in Europe. This is seen as a reminder to consumers of the volatility in fossil fuel prices.
Lead analyst and founder of the Centre for Research on Energy and Clean Air, Lauri Myllyvirta, explained that when there is one price spike in a low-inflation environment, people might ignore it. But when another spike occurs, it can be a moment that awakens the realisation that prices are highly volatile and driving petrol vehicles will only continue to expose users to that risk.
On the other hand, China, which sources more than 40% of its oil from the Middle East, is beginning to reap the benefits of its shift to renewables. With the world’s largest oil reserves as well as its status as the biggest producer of wind and solar energy, China is considered better protected from energy crises than other Asian countries.
“The deployment of EVs in China, which accounts for around 50% of new car sales and about 12% of all registered vehicles, cut the country’s oil consumption by nearly 10% last year,” Myllyvirta told CNN International.
Myllyvirta added that from China’s perspective, this scenario is exactly what they had in mind when implementing their energy security strategy.
Executive Director of the Institute of Middle East Studies at Peking University HSBC Business School, Zhu Zhaoyi, said the oil crisis could accelerate China’s current clean energy ambitions, particularly peaking emissions by 2030 and carbon neutrality by 2060.
Zhaoyi emphasised that China’s leadership has seen this happen before. According to him, every time there is instability in the Middle East, it reinforces the same lesson that relying on fossil fuel imports is not only bad for the environment but also a national security issue.
State support that has helped China become a global leader in affordable EVs has also created a brutally competitive landscape for its local automakers. Many of them are now struggling to survive in an oversupplied market.
Consulting firm AlixPartners estimates that only about 15 of the 129 Chinese EV brands on the market in 2024 will be financially viable by 2030. Analysts predict domestic demand will slow further as the Chinese government phases out subsidies.
Automotive consultant from AlixPartners, Yichao Zhang, opined that the recent oil price surge may give automakers the much-needed boost domestically, but they still need foreign markets to absorb excess supply.
Zhang said that while the oil price increase can help grow the EV pie in China, its size won’t double. He admitted that he doesn’t think it can immediately resolve the overcapacity issue.
That overcapacity is unlikely to benefit consumers in the United States (US), where high tariffs have effectively locked Chinese EVs out of the market to protect local producers. Earlier this year, US President Donald Trump appeared ready to welcome Chinese EV brands, but only if they build factories in the country.
However, in Asia, many countries desperately need ways to cut energy use amid dwindling fuel stocks. Some countries like Thailand, the Philippines, and Vietnam have even instructed their citizens to