US Sanctions Squeeze China's Iranian Oil Lifeline

US sanctions on Iran are squeezing China's oil imports, which have fallen 48% since the Iran war began. Chinese crude imports from Iran through the Strait of Hormuz averaged about 530,000 barrels a day in July and August, down 36% from the first half of 2026 and 72% 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 expanded the US sanctions campaign against Iran, targeting more than 60 entities and threatening countries doing business with Tehran. China responded by opposing unilateral sanctions, warning they risk worsening the conflict. Foreign Ministry spokesman Lin Jian said Beijing will 'take all necessary measures to safeguard its own interests firmly'.

China initially leaned on the Red Sea route for Middle Eastern crude after the Strait of Hormuz was closed in late February. However, this alternative has come under pressure as the Houthis declared a blockade of Saudi Arabia on July 20 and attacked Saudi-linked tankers.

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.