A war rattling the Strait of Hormuz should, in theory, be a problem for China. Half its crude imports transit that chokepoint, and so does a third of its LNG. Since the US and Israeli strikes began hitting Iranian infrastructure on February 28, oil has surged more than 50% at its peak. On paper, it looked like China’s worst nightmare.
It wasn’t. Foreign Policy argued last week that China may actually emerge from this crisis stronger — that two decades of deliberate electrification have built precisely the kind of hedge this moment tests. That argument is sound, but it leaves a question unasked: How did China get so far ahead, and what does that say about the country that started the war?
The hedge was already in place
China’s exposure to Hormuz is real but increasingly limited, as a consequence of a structural shift that has been underway for two decades. Oil and gas flowing through the strait account for roughly 6% of China’s total energy consumption, a share that has been steadily declining as Beijing has systematically reduced its dependence on fossil fuels.
Since the early 2000s, China has pursued a consistent national electrification strategy through successive five-year plans, setting non-fossil energy targets each time and consistently exceeding them. This week, China’s National People’s Congress formally adopted its 15th five-year plan, with targets for offshore wind to exceed 100 gigawatts by 2030, a 420 GW clean-energy transmission corridor target, and a 17% carbon intensity reduction goal.
By 2024, clean energy met 84% of China’s electricity demand growth, and nearly half of new passenger vehicles sold in China last year were electric. The result is that oil and gas now supply only a fraction of China’s power mix.
The result is that the current disruption in the Strait of Hormuz, which would have been an economic emergency for China a decade ago, is now a supply shock the country can likely absorb better than almost any other major importer. China didn’t just build clean energy capacity. It redesigned its entire economy around electricity and, in doing so, built a hedge against exactly the kind of geopolitical shock now unfolding in the Persian Gulf.
Twenty years of whiplash
Each presidential administration since George W. Bush’s has revoked more of its predecessor’s energy orders than the one before it — two under Obama, five under Trump I, nine under Biden, and 14 in the early weeks of Trump II. What that escalating number actually measures is the shrinking expected lifespan of any federal energy policy.
A developer financing a 25-year asset isn’t just pricing today’s rules. They’re pricing the probability that those rules survive the next transition, and the one after that. Each cycle makes that probability harder to estimate, until at a certain point it stops being a political risk you can model and becomes a reason not to build at all.
This political ping-pong on energy not only impacts deployment of projects, but also has had huge implications for supply chain development. American researchers invented modern solar photovoltaic technology, and then watched China build up the industry around their invention. For two decades, inconsistent federal policy — including tax credits that expired and were renewed, trade fights that raised costs, and no durable manufacturing strategy — prevented the U.S. from building a domestic industry at scale.
China made a sustained 20-year bet instead, and now controls more than 80% of global solar manufacturing capacity. The pattern now emerging around data centers, grid buildout, and electrification infrastructure looks similar: The innovation is often American, but the factories aren’t.
While political mood swings have always been a part of the U.S. story, the volatility seen over the last 14 months is unprecedented. After declaring energy dominance a governing priority, the Trump administration has raised and dropped tariffs on solar panels (increasing utility-scale project costs by an estimated 9-10%). The GOP’s One Big Beautiful Bill terminated both the EV tax credit and the residential solar credit, and gutted wind and solar tax credits, giving developers a 12-month construction window before termination. Trump froze the offshore wind permitting system by executive order, then dismantled lease area by lease area, then used the attack as leverage in a state-level gas pipeline fight, then froze permitting again.
The consequences have already become visible in several large projects. In November 2025, ExxonMobil suspended its $7 billion blue hydrogen plant project at its Baytown, Texas complex indefinitely. This project would have been among the world’s largest, backed by federal cost-share and partners including ADNOC and Air Liquide. ExxonMobil’s CEO cited the OBBB’s narrowed 45V hydrogen credit timeline and said the company would not move forward without an eventual path to a market-driven business. Baytown was not a wind or solar project; far from it. It was an oil company’s bet on a technology the federal government had explicitly incentivized.
The administration has championed coal and nuclear as near-term answers to the projected power surge by AI data centers. However, this position ignores coal’s economics — and enormous climate and public health toll — and nuclear’s 15-to-20-year construction timelines. It declared an energy emergency to lower costs while imposing tariffs projected to raise the cost of building power infrastructure by 6-11%.
The Iran war has added another line: The conflict has driven U.S. fossil gas prices significantly higher over a mere few weeks, a direct consequence of the same Hormuz disruption the administration’s military action helped trigger.
The through-line across all of it is not ideology. It is the absence of any durable through-line at all.
Capital allocated across a 25-year horizon doesn’t choose between policy regimes based on ideology. It prices the probability that whatever rules exist today will still exist when the asset comes online. A developer can work with a 20% chance that the next administration changes a tax credit. What’s harder to price is a pattern in which the rules become less stable with every transition for 20 years running, with each new administration revoking more of its predecessor’s energy commitments than the one before.
That’s not an ordinary policy risk, as every market has. This is something more structural: a track record that makes the U.S. look, from a capital perspective, like a counterparty that can’t be trusted to hold a position across a political cycle.
And the numbers are starting to reflect it. In the first half of 2025, U.S. renewable energy investment fell 36% compared to the second half of 2024, while EU investment rose 63% over the same period. Infrastructure investors are now tactically favoring Western Europe over the U.S. due to political uncertainty.
China doesn’t solve this problem because its policies are good or because it has some moral attachment to renewables. It solves it because the capital knows Beijing won’t reverse itself on electrification regardless of who’s nominally in charge. That’s the actual asset: predictability, not virtue. The U.S.’ lack of that same predictability is starting to show up across every long-duration energy asset class through higher financing costs, shorter investment horizons, and a systematic preference for projects that can be permitted, built, and generating revenue before the next administration arrives.
The Iran war does not create an inherent advantage for China. It stress-tests both energy systems simultaneously, under live conditions, with real money on the line. China’s system has been built, over two decades, to absorb exactly this kind of shock. The United States spent that same period debating whether the last administration’s bets were worth keeping.
The result is not a Chinese energy miracle. It is an American policy failure that has been compounding over the last 20 years.
Editor’s note: This story was updated on March 18 to remove a false statement that fossil gas prices are at their highest point in either Trump administration; prices actually hit a higher point during the president’s first term.
