US sanctions threaten China’s Iranian oil lifeline as Hormuz blockade cuts imports 48%

The United States has imposed "economic D-Day" sanctions on Iran, targeting over 60 entities and threatening countries that engage in business with Tehran. These sanctions have further squeezed China's imports of Iranian crude, which have fallen by 48% since the start of the Iran war. In July and August, Chinese crude imports from Iran through the Strait of Hormuz averaged about 530,000 barrels per day, down 36% from the first half of 2026 and 72% below their peak in October 2024.

China is the world's largest crude importer, taking about 12.4 million barrels per day in 2025, with the Middle East supplying roughly half. Beijing is also the top buyer of sanctioned Iranian barrels, purchasing them at deep discounts for years, giving its independent "teapot" refiners cheap feedstock not relied upon by state-owned majors.

US Treasury Secretary Scott Bessent expanded the US sanctions campaign against Iran, but again stopped short of major Chinese banks. China responded by warning that unilateral sanctions risk worsening the conflict and stating that they would "take all necessary measures to safeguard its own interests firmly". China's imports of Middle Eastern crude have been redirected through the Suez Canal and Bab Al Mandeb, but these routes have come under pressure due to the Houthi blockade of Saudi Arabia and attacks on Saudi-linked tankers.

Some state-owned Chinese very large crude carriers (VLCCs) have stopped sending vessels through the Bab Al Mandeb and the Strait of Hormuz, anchoring outside Hormuz instead. Ship-to-ship transfers in the Gulf of Oman accounted for around 600,000 barrels per day of China-bound crude in June and July. Chinese refiners are becoming increasingly aggressive bidders for Gulf barrels as global crude supply remains tight due to the dual blockade, and costs are expected to rise significantly.