The Strait of Hormuz is today’s energy chokepoint. China is tomorrow’s.

Key Points:

• The strategic importance of the Strait of Hormuz as a chokepoint for global oil supply is expected to decline over the next 20 years due to the ongoing global shift toward decarbonization and increased adoption of electric vehicles, reducing the world's vulnerability to oil price shocks from the region.
• Critical minerals and rare earth elements (REEs), essential for clean energy technologies like EVs, wind turbines, and solar panels, are becoming the new focus of geopolitical competition, with China dominating global production, processing, and refining capacities.
• Unlike oil, where geography determines strategic control, the new energy landscape's chokepoints are industrial, centered on China's near-monopoly in REE processing and refining, giving it significant leverage that it has already demonstrated by restricting exports in past conflicts.
• The U.S. possesses substantial REE reserves and mining capacity but lacks sufficient domestic processing and refining infrastructure, making it dependent on China and vulnerable to supply disruptions impacting defense, healthcare, and clean energy sectors.
• The global clean energy transition is reshaping geopolitical power from Middle Eastern oil producers to countries rich in critical minerals and processing capabilities, with China emerging as the dominant player, challenging the U.S. to develop its refining capacity to reduce strategic vulnerabilities.