On Wednesday, March 4th, US Treasury Secretary Scott Bessent emphasized the impact of the interruption of oil supply in the Persian Gulf on China during an interview with CNBC. He pointed out that over 50% of China’s energy comes from that region. Bessent mentioned that China may have been purchasing 95% of its crude oil from Iran, but now the activity of importing Iranian oil has clearly stopped.
According to a report by Bloomberg on Tuesday, Beijing is privately pressuring Iran to refrain from attacking oil tankers and liquefied natural gas ships to ensure the security of China’s imports. Since the joint US and Israeli military strikes on Iran last weekend, Iran has been increasingly targeting vessels passing through the strategic chokepoint of the Strait of Hormuz. The shipping in this vital energy passage has nearly come to a standstill after Iran attacked six vessels.
Politico reported that more than half of China’s crude oil imports come from countries currently facing trade interruption risks due to the US-Iran conflict. Apart from the approximately 1.5 million barrels of oil exported daily to China from Iran (about 550 million barrels annually), China also relies on 1.4 billion barrels of oil from five other countries dependent on the Strait of Hormuz.
Prior to this, Beijing had already suffered losses in another major oil source, Venezuela. Now, the Middle East conflict has disrupted transportation through the Strait of Hormuz, potentially causing a direct impact on the Chinese economy. China has been one of the few buyers of goods from countries facing harsh sanctions. Iran and Venezuela together account for about 17% of China’s total oil imports, which is a significant proportion for the world’s largest crude oil importer.
A recent report by Bloomberg Economics stated that if Iran completely halts oil production, oil prices could rise by about 20%. Approximately 20% of global oil supply is transported through the Strait of Hormuz, and should the strait be closed, oil prices could soar to $108 per barrel.
The report highlighted that if oil prices continue to rise, major oil-importing countries like China, Europe, and India will be affected while oil-exporting countries like Russia, Canada, and Norway will benefit. As for the United States, although higher fuel costs may squeeze consumers’ incomes, the impact on the overall economy is relatively smaller due to the US becoming an oil-exporting country with shale oil.
During a Pentagon press conference on Wednesday, when asked about any message for Iran’s two allies, Russia and China, US Defense Secretary Pete Hegseth replied, “I have no message for them, they are irrelevant here. Our actions are not aimed at them, but at Iran’s nuclear ambitions.”