Energy is quietly becoming the U.S. government's secret weapon in its technological competition with China. While headlines focus on AI chip bans and export controls, a broader strategy is emerging: by controlling global energy flows and critical chokepoints, the United States could indirectly constrain China's ability to build the massive data centers and manufacturing infrastructure that artificial intelligence requires. This shift transforms energy from a domestic policy issue into a geopolitical lever. Why Does AI Need So Much Energy? Artificial intelligence is extraordinarily energy-intensive. Training and running large language models requires enormous amounts of electricity for data centers, petrochemical materials for advanced semiconductor manufacturing, and industrial energy for the supply chains that extract and process critical minerals. China currently holds significant structural advantages in critical minerals across nearly every level of the supply chain, including resource ownership, production, refining, and processing capacity that underpin advanced technologies. Closing that gap quickly would be difficult for the United States. One possible strategic response is to focus on energy leverage instead. If China's advantage lies in mineral supply chains, the United States' comparative advantage lies in energy production, maritime security, the control of energy flows, and the global financial systems that govern energy trade. By shaping the cost and security of energy flows, Washington could indirectly influence the cost structure of China's AI expansion. How Is the U.S. Using Energy as a Strategic Tool? The Trump administration has embraced the concept of "energy dominance," which has evolved beyond simply producing more domestic oil. Recent geopolitical moves suggest the strategy now involves controlling energy assets, strategic chokepoints, and global energy flows. Recent U.S. actions in Venezuela and Iran illustrate two different elements of this broader energy-as-geopolitics strategy. - Resource Control: Venezuela holds some of the largest proven oil reserves in the world, along with significant reserves of strategic minerals like lithium and copper. Increased U.S. influence over Venezuelan energy assets could expand Western control over major supply capacity in the Western Hemisphere while minimizing China and Russia's influence. - Chokepoint Dominance: Iran's strategic importance lies partly in its proximity to the Strait of Hormuz, one of the most critical energy chokepoints in the world. Roughly 20 million barrels of oil per day, about one-fifth of global petroleum consumption, pass through this narrow corridor, along with roughly 20 percent of global liquefied natural gas trade. - Asian Energy Flows: Most exports from major producers in the region, including Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates, must pass through the Strait of Hormuz. Much of that energy ultimately flows to Asia, particularly China, which remains heavily dependent on imported energy despite building significant domestic energy storage capacity. China is not energy independent and relies heavily on imported energy, particularly from the Middle East via shipments passing through the Strait of Hormuz. For decades, the strait has been treated primarily as a security risk. But in a world shaped by geopolitical competition, its significance may be expanding as a tool for constraining rival powers. What Could Happen in Iran, and Why Does It Matter? The trajectory of conflict involving Iran remains uncertain, but the outcome could reshape global energy markets and the broader U.S.-China competition. The critical variable is not only how long any conflict lasts, but what form of governance ultimately emerges in Iran and how that outcome affects regional energy flows and security. Three broad governance scenarios illustrate how different political trajectories could reshape the global energy system and influence the AI race: - Political Transformation: A political transformation in Iran that produces a government more willing to engage with international markets could eventually allow Iran's substantial oil, natural gas, and mineral resources to reenter global supply chains more fully. Regional energy infrastructure could stabilize relatively quickly, and access to Iran's significant resource base could expand global supply and potentially reduce long-term supply risks in the region. - System Continuity: If the current political structure in Iran largely survives the conflict, even if weakened, tensions between Iran and Western powers would likely continue. Periodic disruptions to regional security could persist, and producers across the region would likely rely heavily on continued U.S. naval presence to secure shipping lanes and protect critical infrastructure. This dynamic would increase Washington's influence over the security of energy transportation through the Strait of Hormuz, giving the United States greater leverage over the conditions under which energy flows to global markets. - Fragmentation and Instability: A period of prolonged instability in which Iran's central authority weakens could lead to recurring security risks in the region. Maritime security threats, attacks on infrastructure, and disruptions to shipping could occur intermittently, keeping insurance premiums, transportation risks, and price volatility elevated for extended periods. How to Understand Energy's Role in the AI Competition - Energy as Leverage: The U.S. can indirectly constrain China's AI expansion by controlling the cost and security of energy flows that power data centers and manufacturing infrastructure, rather than relying solely on chip export bans. - Mineral Advantage vs. Energy Advantage: While China dominates critical mineral supply chains, the United States holds comparative advantages in energy production, maritime security, and control over global energy chokepoints that China depends on. - Geopolitical Outcomes Matter: How conflicts in the Middle East resolve will determine whether energy becomes more abundant or scarce, directly affecting the cost structure of AI development for both the U.S. and China. This emerging strategy represents a fundamental shift in how great powers compete. Rather than competing solely on technological innovation or manufacturing capacity, the United States is positioning energy and resource control as central to national strategy. For China, which cannot easily replace Middle Eastern energy imports or diversify away from the Strait of Hormuz, this creates a structural vulnerability that could slow its AI ambitions for years to come.
