While oil gets the headlines, disruptions to liquefied natural gas (LNG) supply are a more direct threat. LNG is a key energy source for data centers, so price spikes or shortages could derail the massive capital expenditures driving the AI buildout.

As its import needs peak, China is positioned to transition from a simple demand center to a sophisticated global LNG trader. Its vast storage capacity, extensive regasification infrastructure, and diverse contract portfolio will provide the flexibility and optionality to resell cargoes and influence global energy flows.

Even a brief closure of the Strait of Hormuz has immediate, lasting effects. Shutting in millions of barrels of oil and LNG damages production facilities, which can take over 60 days to bring back online, ensuring a recession even if the conflict ends quickly.

China maintains a strategic petroleum reserve covering over 120 days of imports, exceeding the 90-day international standard. This massive stockpile is not just for economic stability but is a key national security measure, driven by long-standing fears that the U.S. Navy could cut off its seaborne oil supplies during a conflict.

Massive expansion of Russian pipeline capacity, including the Power of Siberia 2, will increase gas flows to China from 38 BCM in 2025 to 106 BCM by 2035. This dramatic increase in secure overland supply is the primary reason why China's demand for seaborne LNG is forecast to peak and then plateau around 2032.

Unlike restarting conventional oil production, restarting a liquefied natural gas (LNG) facility is a complex and risky process. The extreme temperature changes, from -260°F to ambient and back, cause metal components to expand and contract, which can lead to equipment failure. This makes the supply chain for LNG much more fragile and slow to recover from disruptions.

While options like releasing strategic reserves and tapping Saudi spare capacity exist, they are temporary stopgaps. These measures fall short of replacing the 20 million barrels per day—over 20% of global production—that flow through the Strait of Hormuz, making its security the paramount issue.

Faced with geopolitical uncertainty in key supplier nations, China employs a dual strategy for energy security. It has built a massive oil stockpile providing 120 days of cover for supply disruptions. Concurrently, it's rapidly electrifying its transport sector to reduce its long-term dependence on imported oil.

LNG's market response to a blockade is far quicker than oil's due to storage limitations. With only 2-3 days of spare storage capacity, major LNG producers like Qatar are forced to shut down production almost immediately, while oil producers may have weeks of capacity.