The Iran War—good or bad for China?

CHINA ADVISORY - Report 16 Mar 2026 by Andrew Collier

The U.S.-Iran war underscores both geopolitical weakness and strength for China. While the war exacerbates China’s already large domestic economic problems, with rising energy prices, potential inflation, and trade disruption, the United States’ weakness, chaotic policymaking, and military adventurism is good for China and its global ambitions. However, in the end, the damage to China’s weak economy far outweighs the benefits of poor U.S. policies.

• China remains vulnerable to oil shocks—Iran supplies 13 percent of its crude oil, while 25 percent of its gas imports pass through the Strait of Hormuz. However, since his assumption of Party Leader in 2012, Xi Jinping has resolved to insulate China from external threats. The Iran War and the rising geopolitical instability caused by Trump’s erratic policies is only strengthening Chinese commitment to increase domestic economic capacity.

• Iran is a double-edged sword for China’s Taiwan goals. On the face of it, the war in Iran has made the U.S. look weak, distracted it from other areas of interest (such as Asia), and given Xi Jinping the opportunity to make China appear to be a stable partner in the region for the Mideast. However, the Iran War also demonstrates the relative weakness of a global power in the face of entrenched opposition. Iran, a weak nation with few regional ties, has been able to severely upset the global economy, even while facing the world’s strongest military. The same could happen with Taiwan. If the Iran scenario holds, Taiwan could prevent a quick takeover of the country by China, leading to a Chinese quagmire.

The Iran war remains a mixed message for China. Given the future of China’s relations with the Middle East, the U.S., and the globe in general, the current problems of geopolitical tension, rising inflation, and weakening trade links are what is on the minds of the Chinese leadership. Trump, despite his erratic policies, is still the leader of the world’s largest market.

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