US-Iran conflict creates opportunity for chinese exports to gain global market share

Against the backdrop of rising energy prices and disrupted supply chains, economists say Chinese exporters may gain market share from rivals in countries hit hardest by the energy crisis, the Financial Times reported.

China, with large oil reserves and abundant domestic energy supply, can maintain steadier production. Analysts also argue that disruptions in global oil and gas markets could accelerate a longer-term shift toward green energy, an area where China is strong.

Potential market-share gains for Chinese exporters

Fred Neumann, HSBC’s Asia-Pacific chief economist, said: “China's exports could capture additional global market share due to the energy shock.”

Neumann and other analysts noted that the extent of any gains for Chinese manufacturers will depend on how much the conflict affects global growth. “It's unclear whether global demand can be sustained,” Neumann said.

Export momentum and manufacturing signals

China has increasingly relied on exports to offset weak domestic demand following the prolonged property sector crisis. After recording a record trade surplus of $1.2 trillion last year, China continued to post export growth of nearly 22% year-on-year in the first two months of 2026.

Capital Economics estimated that China’s export growth in 2026 will reach 6%, up from a 5% forecast made prior to the Iran war. Julian Evans-Pritchard, China economist at Capital Economics, said China is well positioned to win global export market share, and that energy costs there may not rise as much as in other economies.

Official data released this week showed China’s PMI at 50.4 in March, indicating manufacturing activity returned to expansion after two months of contraction.

Energy exposure and supply-chain resilience

Citi economists said that a month after the war began, China’s industrial production appears to be weathering the crisis well. Xiangrong Yu, a Citi economist, said only about 6% of China’s energy consumption depends on Gulf imports, helping manufacturers offset some of the higher energy costs weighing on firms in other countries.

Yu added: “Unless there is a prolonged full-blown oil crisis, China's supply stability could even allow it to expand export market share, similar to the momentum seen during the Covid shock in 2020.” He also pointed to China’s long-term energy strategy, including investment in renewable energy, diversifying import sources, and building strategic reserves.

China also sources a larger share of some input materials from the Middle East. For example, more than half of the country’s sulfur supply is imported from the Middle East.

Rising orders and shifts in sourcing strategies

Exporters in China’s eastern coastal industrial regions reported rising orders from foreign customers concerned about supply-chain resilience in Southeast Asia. Countries such as Vietnam, Thailand and Indonesia rely heavily on imported oil from the Middle East.

A manager at a Hangzhou prototype parts exporter in Zhejiang told the Financial Times that since late March there have been signs that some American and European customers are reversing “China +1” strategies—moving production away from China, often to Southeast Asia, to diversify supply chains and avoid U.S. tariffs.

“One customer told me he is considering moving some orders from Vietnam and Cambodia back to China,” the manager said.

Risks: margins, inflation pressure and demand uncertainty

Despite the potential for export gains, economists warned that profit margins for Chinese producers—already squeezed by more than three years of domestic deflation—are not immune to energy-related price increases.

The oil-price shock is expected to generate inflationary pressure, offsetting some deflation in China. However, economists said the pressure would stem from higher costs rather than stronger final demand.

Huang Yiping, a member of the PBoC’s Monetary Policy Committee and a professor at Peking University, said imported inflation would pressure the Chinese economy. He added that with inflation currently low, China still has room to absorb external pressures, but the ability to do so would depend on the duration and severity of the Middle East conflict.

In Zhejiang, a manager at a plastics manufacturer said the costs of some materials have surged, including brominated flame retardants, which have risen two- to threefold. “We could post a record loss in March. To survive now, we must bear the costs together with our customers,” he said.

Consumer demand could also be affected. While the government controls fuel prices and has implemented measures to shield consumers, retail fuel prices rose sharply last week, the biggest increase on record.

Outlook for exports

Hui Shan, chief China economist at Goldman Sachs, warned that the energy shock would reduce foreign markets’ flexibility in absorbing Chinese products. “Exports from China will continue to rise and gain market share. The issue is that with the Iran conflict, export growth may slow relative to expectations,” Hui said.