US sanctions deepen pressure on China’s Iranian oil trade

Washington's economic offensive against Iran is putting pressure on China's access to discounted Iranian crude, according to a recent report. Chinese imports of Iranian crude through the Strait of Hormuz averaged around 530,000 barrels a day in July and August, a 36% decrease from the first half of 2026 and 72% below their October 2024 peak.

This decline has been driven by the Iran war, blockades, and maritime attacks, which have sharply reduced flows through the Middle East's main energy chokepoints. The United States has intensified its economic sanctions against Iran, announcing penalties against around 60 individuals, companies, and vessels, and warning that continued dealings with Iran could lead to secondary penalties.

China is the largest buyer of Iranian oil, absorbing most of Tehran's exportable crude after Western sanctions pushed other customers away. Discounted Iranian barrels were crucial for independent Chinese refiners, providing them with feedstock priced below Middle Eastern grades. So far, the US has not targeted major Chinese banks or state-owned companies, aiming to avoid a broader confrontation with Beijing.

However, Beijing has warned it will defend its legitimate trade with Iran and opposes unilateral sanctions outside the United Nations system. Heightened supply constraints have partly achieved the sanctions' goals, with Iran's crude loadings falling from 893,000 barrels a day in July to about 156,000 barrels a day by August 17. Tanker movements have shifted to less transparent routes, increasing transport costs and delays.

Despite efforts, Iran's crude exports remain dependent on complicated ship-to-ship transfers, floating storage, and vessels operating with limited tracking. China has attempted to insulate itself from supply shocks through inventories and diversified purchases, but sustained high prices and renewed supply constraints could limit further buying.