US “economic D-Day” sanctions threaten to further squeeze China’s imports of Iranian crude, which have fallen 48 per cent since the Iran war began, as the Strait of Hormuz blockade and Houthi attacks on the Bab Al Mandeb disrupt supply.
Chinese crude imports from Iran through Hormuz averaged about 530,000 barrels a day in July and August, according to Kpler data, down 36 per cent from the first half of 2026 and 72 per cent below their peak in October 2024.
China is the world’s biggest crude importer, taking about 12.4 million barrels a day in 2025, with the Middle East supplying roughly half. Beijing is also the top buyer of sanctioned Iranian barrels, which it has purchased at deep discounts for years, giving its independent “teapot” refiners cheap feedstock that the state-owned majors don’t rely on.
US Treasury Secretary Scott Bessent on Monday expanded the US sanctions campaign against Iran, targeting more than 60 entities and threatening countries doing business with Tehran, but again stopped short of major Chinese banks. China was Iran’s second-largest trading partner in 2025, underscoring the wider economic stakes of targeting Beijing’s financial institutions.
Beijing responded on Tuesday, with Foreign Ministry spokesman Lin Jian saying China opposes unilateral sanctions and warning they risk worsening the conflict. China would “take all necessary measures to safeguard its own interests firmly”, he said.
“The significance of the announcement lies as much in what Washington has not done as in what it has,” said Neil Quilliam, associate fellow at the Chatham House think tank in London. “Without measures against major Chinese banks, China will remain able to sustain its oil imports from Iran with relatively little disruption.”
China initially leaned more heavily on the Red Sea route for Middle Eastern crude after the Strait of Hormuz was effectively closed in late February. Saudi Arabia operated its 7 million bpd East-West pipeline at full capacity, moving crude to Yanbu on the west coast for export to Asia, allowing Chinese buyers to replace some barrels that could no longer move through Hormuz. However, that alternative has since come under pressure as the Houthis declared a blockade of Saudi Arabia on July 20 and attacked Saudi-linked tankers.
Rystad Energy
Chinese crude arrivals through the Suez Canal in the north and Bab Al Mandeb reached 2.62 million bpd in April, up 228 per cent on their 800,000 bpd average over the previous 20 months, according to Kpler data. The surge has since reversed, with arrivals falling to 940,000 bpd in July before edging up to 1.02 million bpd in August. China’s imports are currently 61 per cent below the April peak.
Some state-owned Chinese very large crude carriers (VLCCs) are loading at Sidi Kerir, the Mediterranean terminal for Egypt's Sumed pipeline, rather than risk the Bab Al Mandeb route, said Rahul Choudhury, vice president of upstream research at Rystad Energy. A cargo that normally takes 25 to 27 days via Bab Al Mandeb can take much longer. “If you export via the Cape of Good Hope and towards Asia, it will basically take around 50 days,” he said.
State-owned Cosco Shipping and China Merchants Energy Shipping, together operating more than 100 VLCCs and handling roughly half of China’s Middle East imports before the war, stopped sending vessels through Bab Al Mandeb and the Strait of Hormuz in July. Their vessels are now anchored outside Hormuz, awaiting shuttle carriers to load crude. Ship-to-ship transfers in the Gulf of Oman accounted for around 600,000 bpd of China-bound crude in June and July, according to Kpler.
Asian buyers are leaning further on ship-to-ship transfers near Sohar in Oman and Fujairah in the UAE, while European refiners, closer to Sidi Kerir, absorb more of the Sumed and Suez flows, Mr Choudhury said. Shuttle-tanker flows remain below pre-war levels, but given how often vessels have been attacked, exports have held up relatively well, said Matt Wright, lead freight analyst at Kpler.
Even the shuttle routes remain unsafe after a tanker was disabled by an unidentified projectile in the Omani sector of the strait on Tuesday. Congestion at Oman’s port of Sohar has raised the risk of an Iranian strike aimed at shutting the transfers down, Mr Choudhury said. Of the 371 Hormuz crossings recorded between August 1 and 25, 252, or nearly seven in 10, went dark or took unclassified routes, according to Kpler data.
The longer routes used to circumvent blockades and shipping threats are also becoming increasingly expensive. Freight on the Suez route now runs at $10-$11 a barrel, more than double the roughly $5 a barrel for Yanbu shipments via Bab Al Mandeb in early July, before the Houthi attacks, said Mr Wright. With voyages taking up to twice as long, the higher freight costs are adding to the pressure on China’s crude supplies.
Global crude supply remains very tight due to the dual blockade, said Lin Ye, head of APAC oil market research at Rystad Energy, and costs are expected to rise significantly, forcing Beijing to draw on commercial inventories, sufficient, she said, to cover “at least the next four months” of demand. Chinese refiners are also becoming “increasingly active and aggressive bidders for Gulf barrels,” she added.
China has an estimated 1 billion to 1.4 billion barrels of total oil inventories and has so far leaned on commercial stocks rather than its strategic reserve, buying Iranian crude opportunistically when discounts widen. That stockpile gives Beijing room to absorb higher costs and delayed cargoes, but substituting Iranian crude has its limits, Mr Quilliam said. Beijing will seek additional supplies from Russia and other producers where it can, he said, but Iran remains too critical to replace quickly.
“Beijing has even less incentive to give up a source of discounted oil voluntarily,” Mr Quilliam said. “Indeed, disruption elsewhere may increase the value of Iranian crude to China, making compliance with US demands even less likely."
