What happened
A UTS Australia-China Relations Institute analysis (14 October) examines how the Hormuz crisis has tested two models of energy power: US “energy dominance” built on hydrocarbons, and China’s mix of stockpiles, electrification and clean-technology manufacturing.
Flows through the Strait fell sharply after the conflict began but have recovered to around three-quarters of pre-war crude volumes. China cut crude imports by about a third in the June quarter, partly by drawing down inventories, while US strategic petroleum reserves fell to about 284 million barrels, the lowest since 1982.
Australia sits on both sides of the trade. It exported 73.8% of its gas production in 2024-25, yet imported 80.8% of the refined petroleum it consumed.
Market impact
LNG. Government forecasts have LNG export earnings rising from $57 billion in 2025-26 to $70 billion in 2026-27 on higher prices, then falling to about $42 billion in real terms by 2030-31 as US, Canadian and Qatari supply grows. China’s LNG imports fell 14% in 2025 and a further 12% between March and June 2026.
Copper and critical minerals. Copper export earnings are forecast to grow from $14 billion to $19 billion in real terms by 2030-31. Critical minerals earnings are forecast at $25 billion in 2026-27, easing to $22 billion by 2030-31. The authors stress that outcomes will differ commodity by commodity.
Gas versus batteries. CSIRO’s 2026 GenCost work finds batteries increasingly competitive with gas peaking plants for short-duration power. Gas is still expected to supply 3-7% of generation by 2050.
Policy support. A refundable 10% tax offset for critical minerals processing starts on 1 July 2027. The Government has also committed $3.2 billion to a fuel security reserve and $1 billion to a Green Iron Investment Fund.
What it means for BGW clients
- Treat the gas windfall as cyclical. Portfolios with heavy exposure to Australian energy producers are carrying earnings that the Government’s own forecast has fading by the end of the decade. Dividend assumptions built on 2026-27 peaks deserve a second look.
- Be selective on electrification. Copper, networks and storage have supportive demand, but China still refines over 90% of some critical minerals, so margin capture is not guaranteed. I would favour balanced exposure over a single-commodity bet.
- Watch the inflation channel. Heavy reliance on imported refined fuel means oil shocks can feed into inflation and interest rates, which matters for clients with geared property or long-duration bonds. This is my reading, not a conclusion of the analysis.
- Check operating-business exposure. Clients with interests in transport, agriculture, hospitality or logistics are directly exposed to fuel costs.
If you would like to review how your portfolio is exposed to energy, commodities and the inflation channel, I am happy to take you through it. If you would like to see where the broader share market sits today, the Australia Market Valuation dashboard is updated regularly.