A historic oil shock and surging fuel prices are strengthening the case for electric vehicles. China’s EV makers are eager to deliver.

The United States and Israel’s war against Iran has disrupted critical fossil fuel supplies from the Middle East, pushing up crude oil prices to as high as $119 a barrel last week. This has sparked fears of worsened inflation, or even a global recession.

But the turmoil couldn’t have come at a better time for China’s EV industry. While China manufactures and exports more electric cars than any other nation, its carmakers face fierce price competition and slowing growth at home. Chinese brands are under increasing pressure to find other markets.

Now, as Chinese EVs are getting cheaper, gasoline is getting more expensive. That combination will likely turbocharge the industry’s global expansion, analysts said, particularly among Asian nations bearing the brunt of the fuel shortage.

“There’s potential for Chinese brands to make a ton of inroads into Asia on the backs of higher petrol costs,” said Tu Le, managing director at Sino Auto Insights, a car-focused consultancy. “I would look for them to take full advantage of that.”

Despite growing investment in renewable energy in Asia, the three-week long conflict in the Middle East has illuminated the region’s continued reliance on oil imports. About 60% of Asia’s crude supply comes from the Middle East via the Strait of Hormuz, where Iran has severely restricted the flow of cargo.

In a recent report, Ember, an energy think tank, called EVs “the largest lever to cut import bills,” and estimated that the use of EVs last year curbed global crude consumption by 1.7 million barrels per day – about 70% of Iran’s exports in 2025.

Similar to how Russia’s invasion of Ukraine drove renewable energy investment in Europe, analysts said the current oil crisis could be another turning point for the clean energy industry in Asia.

“When it’s one price spike in a low inflation environment, people can write it off,” said Lauri Myllyvirta, lead analyst and co-founder of the Centre for Research on Energy and Clean Air. “When there’s another, it could be a ‘fool me twice’ moment that drives home the fact that prices are volatile and driving a petrol vehicle just keeps you exposed to them.”

In China, which gets more than 40% of its oil from the Middle East, a shift toward renewable energy has paid off. With the world’s largest stockpile of oil reserves, and as its biggest generator of wind and solar power, China is better insulated from the energy crisis than other Asian nations.

Myllyvirta estimates that the spread of EVs in China, which account for about 50% of new car sales and about 12% of all registered vehicles, cut the country’s oil consumption by nearly 10% last year.

“From China’s perspective, this scenario is exactly what has been at the back of their minds when they have been pursuing their energy security strategy,” he said.

Zhu Zhaoyi, executive director of the Institute of Middle East Studies at Peking University HSBC Business School, said the oil crisis could accelerate China’s current clean-energy ambitions – specifically, reaching peak emissions by 2030 and carbon neutrality by 2060.

“China’s leadership has seen this movie before. Every time there’s instability in the Middle East, it reinforces the same lesson: depending on imported fossil fuels is not just bad for the environment, it’s a national security problem,” Zhu said.

The state support that helped China become the global leader in affordable EVs has also created a cutthroat landscape for its homegrown carmakers, many of which are now struggling to survive in an oversupplied market.

Consulting firm AlixPartners estimates that only about 15 out of 129 Chinese EV brands in the market during 2024 will be financially viable in 2030. Analysts expect domestic demand will slow further as the Chinese government phases out subsides supporting EV adoption.

The recent oil price spike could give carmakers a much-needed boost at home, but they’ll still need foreign markets to absorb excess supply.

“Even if the oil price increase can help to further enlarge the cake of EVs in China, it won’t be like double the size,” said Yichao Zhang, an automotive consultant with AlixPartners. “I don’t think it can solve the overcapacity issue immediately.”

That overcapacity is unlikely to benefit consumers in the US, where steep tariffs have virtually locked Chinese EVs out of the market to protect local automakers including market leader Tesla. Earlier this year, US President Donald Trump seemed ready to welcome Chinese EV brands – but only if they build plants in the country.

But in Asia, nations are desperate for ways to cut back on energy use as fuel stockpiles have shrunk. Some countries such as Thailand, the Philippines and Vietnam have told people to work from home and limit the use of air conditioning. Vietnam’s leading EV maker VinFast also began offering discounts on electric cars and motorbikes following the strikes on Iran.

Lam Pham, an Asia energy analyst at Ember, said Chinese EVs have a leg up in most Asian markets, given their price competitiveness, advanced battery technology and comprehensive supply chain.

“Rising fuel price volatility and stronger policy support mean the EV market in Asia is set to grow rapidly. This expansion will benefit EV manufacturers across the board, but especially those that can scale quickly and offer affordable models,” he said.