US sanctions could threaten to put the squeeze on China’s imports of Iranian crude, which have already fallen 48 per cent since the Iran war began due to the Strait of Hormuz blockade and Houthi rebel attacks on the Bab Al Mandeb strait.
Chinese crude imports from Iran through the Strait of 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 the year and 72 per cent below their peak in October 2024.
China is the world’s biggest crude importer, taking about 12.4 million barrels per day in 2025, with the Middle East supplying roughly half. Beijing is also the largest 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 American sanctions on Iran, targeting more than 60 entities and threatening countries that continue to do business with Tehran, but again stopped short of punitive measures against major Chinese banks. China was Iran’s second-largest trading partner in 2025, underscoring how big the economic stakes would be if Beijing’s financial institutions were hit by sanctions.
China has warned the US about the risk of unilateral sanctions, with Foreign Ministry spokesman Lin Jian stating that Beijing would “take all necessary measures to safeguard its own interests firmly”.
“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 the Gulf. 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 imports through the Suez Canal in the north and the Bab Al Mandeb strait 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 imports 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, according to Rahul Choudhury, vice president of upstream research at Rystad Energy.
A cargo that normally takes 25 to 27 days to reach the country via Bab Al Mandeb can take much longer. “If you export via the Cape of Good Hope towards Asia, it will basically take around 50 days,” he said.
State-owned Cosco Shipping and China Merchants Energy Shipping, between them, operated more than 100 VLCCs and handled roughly half of China’s Middle East imports before the war. They stopped sending vessels through Bab Al Mandeb and the Strait of Hormuz in July.
Their vessels are now anchored outside the Strait of 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, according to Kpler lead freight analyst Matt Wright.
But shuttle routes remain unsafe after a tanker was disabled by an unidentified projectile in Oman's section 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 Strait of Hormuz crossings recorded between August 1 and 25, 252 of them, 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 becoming increasingly expensive. Freight on the Suez route now runs at $10-$11 a barrel, said Mr Wright. That is more than double the $5-a-barrel price for Yanbu shipments via Bab Al Mandeb in early July, before attacks by Houthi rebels. With voyages taking up to twice as long, the higher freight costs are putting 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 one billion to 1.4 billion barrels of oil and has so far leant on commercial stocks rather than its strategic reserves, 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."
