As the Hormuz crisis continues, we would be wise to remember a lesson from the COVID crisis: local shortages of specific resources can cascade into larger global problems that are difficult to predict. Global attention is currently focused on energy (rising oil and gas prices), food (higher fertilizer costs) and helium (critical for computer chip production), but a closer look reveals at least three additional supply chain disruptions that could spiral into something larger.
First, shortages of naphtha — refined from oil and used in the production of plastics, chips and cars — have triggered an industrial state of emergency across Asia. Both Japan and South Korea are attempting to calm markets, but supply chains are already being disrupted. In Japan, the prime minister intervened to quell online rumors of an imminent shortage after several plastic producers announced production cuts affecting sectors as diverse as food and healthcare. South Korea has banned naphtha exports to protect domestic medical procedures and has reluctantly begun sourcing the material from Russia.
Second, Australia — heavily dependent on diesel — faces rising prices and emerging shortages that threaten to shut down both farming and mining operations. As an emergency measure, several tankers carrying diesel have been sent from the US, a journey that takes up to three months, underscoring the severity of the situation. This matters globally: Australia is one of the world's largest producers of minerals like iron ore, lithium and nickel.
Third, Europe is on course to run out of kerosene within three weeks. While an aviation disruption may appear less urgent than food or mining, it would indirectly affect a wide range of businesses and economies through the collapse of tourism.
Each of these shortages may seem secondary to the broader disruption of energy, food and chip production. But together they threaten industries as diverse as healthcare, mining and tourism — and could push the global economy into territory that is difficult to predict.
In every global crisis of our generation — the 2001 dot-com crash, the 2008 financial crisis, the 2020 COVID crisis — global investors sought safety in US Treasuries, placing capital in the 10-year US government bond. The 2026 war in Iran has broken that pattern. For the first time in a global crisis, China's government bonds are the only safe haven, holding their value while US Treasuries, other government bonds, and even gold have sold off. Meanwhile, equity markets in China have also lost less value than their counterparts in the US, Europe and Japan.
This is happening despite investors' well-documented reservations about Chinese assets — political risk, capital controls, and the difficulty of converting renminbi into dollars, euros, or yen. That is because, as we have written in the past year, China's safe haven status is part of a larger shift: trust in US stability is declining, while China is no longer seen as uninvestable, leads in technological innovation, sets global standards, has soft power and is better prepared for an era of prolonged global conflict.
Ironically, while the US is locked in a global struggle for influence with China, it is China that was better prepared for the war in Iran — the war the US itself started. China's energy system is more resilient against a prolonged conflict in the Middle East, its businesses are the main beneficiaries of the conflict, and the conflict is improving China's reputation as a more stable international partner for trade and investment than the US.
First, China's economy is more resilient to a prolonged conflict in the Middle East than any other major economy. The main reason is the structure of its energy system. As we wrote several weeks ago, China's vision of energy security — a mix of nuclear and renewables, with coal serving as a bridge — is more resilient than the US system, in which oil and gas account for 72% of total energy supply. China also reportedly holds twice as many emergency oil reserves: 1.13 billion barrels compared to 415 million for the US.
Second, China's businesses are the leading producers of the technologies that benefit most from this conflict. In many countries, yet another international conflict driving up oil and gas prices has sparked renewed demand for renewable energy technologies such as solar panels, heat pumps, and batteries — all industries in which China is the world leader. Electric vehicles, another area of Chinese dominance, are also gaining in popularity as a result.
Third, under the second Trump administration, China is rapidly becoming a more stable and predictable international partner than the US. European leaders were already working to improve relations with Beijing before this conflict began. Global investors, meanwhile, are increasingly viewing Chinese government bonds as a relatively stable safe haven. Notably, Iran is reportedly demanding payment in Chinese renminbi from ships seeking passage through the Strait of Hormuz.
Most importantly, even if the US manages to prevent a full economic collapse in the coming weeks — as we warned last week remains a real risk — the dynamic described above is unlikely to reverse. In all three dimensions, this conflict is likely to remain a positive force for China's long-term development.
