US-Saudi tensions escalate over Strait of Hormuz operations amid Iran conflict, threatening defense cooperation

Tensions escalate between the US and Saudi Arabia over Operation Project Freedom in the Strait of Hormuz, through which one-fifth of global oil passes. After Riyadh blocks US access to its bases, Washington threatens to withhold missile interceptors. Meanwhile, the broader conflict with Iran drives oil price volatility, forcing cities like Tokyo and London to enact emergency measures. This instability accelerates a global shift toward renewable energy, positioning China—which controls 80% of clean tech manufacturing—to benefit.

Global oil market volatility

• ▪Oil prices fluctuated from levels not seen since Russia's 2022 invasion of Ukraine to pre-conflict levels during the war on Iran starting in late February 2026
• ▪Governments in Tokyo, New Delhi, and London implemented emergency measures to shield citizens from rising fuel costs during the war on Iran

Strait of Hormuz shipping threats

• ▪The United States and Saudi Arabia clashed over Operation Project Freedom, a United States mission to escort vessels transiting the Strait of Hormuz
• ▪Maritime traffic in the Strait of Hormuz dropped sharply following attacks on two commercial ships after reaching a post-war peak of over 70 transits on June 24, 2026
• ▪Saudi Arabia refused to allow the United States to use Saudi bases and airspace for Operation Project Freedom, prompting United States threats to withhold interceptor systems
• ▪Approximately one-fifth of global oil and liquefied natural gas supplies pass through the Strait of Hormuz during peacetime
• ▪The United States is considering pulling back some of its military presence in Saudi Arabia following Saudi Arabia's refusal to assist with Strait of Hormuz escort missions
• ▪Saudi Arabia pressured the United States to return to negotiations rather than blockading Iranian ports and launching Operation Project Freedom

Middle East pipeline expansion

• ▪The combined capacity of Middle East land pipelines remains well below the approximately 20 million barrels of oil that transited the Strait of Hormuz daily before the war
• ▪Energy suppliers increased land-based exports via Saudi Arabia's East-West Pipeline, the United Arab Emirates' Abu Dhabi Crude Oil Pipeline, and the Iraq-Turkiye Crude Oil Pipeline

Renewable energy acceleration

• ▪Global renewable energy capacity reached a record high in 2025, with non-fossil fuel projects representing approximately 86 percent of added power capacity
• ▪The conflict involving the United States, Israel, and Iran has accelerated global efforts to transition from fossil fuels to renewable energy sources

China's clean energy dominance

• ▪China produces more than 80 percent of the world's wind turbines, solar panels, and energy storage batteries
• ▪China is positioned to benefit from an accelerated global shift to renewable energy due to its dominance in clean energy infrastructure exports