China is Mitigating the Hormuz Crisis, but at What Cost?
When the US blocked the Strait of Hormuz in response to Iran’s military restrictions on this vital oil supply route, uncertainty surged across the global economy. In reaction to the conflict, China, as the largest purchaser of Iranian oil in 2025, abruptly suspended refinery exports, urgently intervened in a planned price increase and entered into discussions with Russia regarding energy supplies. At the same time, Trump has exerted pressure on Xi to cease providing military assistance to Iran by threatening tariffs, allegations that China regards as unfounded. To assess the costs and risks of China’s strategy, both energy security and US-China relations must be examined.
Since the US imposed sanctions on Tehran in 2018 following Trump’s withdrawal from the JCPOA, China has continued to purchase Iranian oil at discounted prices. On the one hand, approximately 90 per cent of Iran’s oil exports have been destined for China at a highly competitive price, at least 8 US dollars per barrel lower, prior to the death of Khamenei. On the other hand, even at such a rate, Iran could still obtain sufficient revenue from China to fund around 45 per cent of its national budget, rendering Beijing economically dependent on Tehran’s cheap oil supply. Nonetheless, Iran accounted for only 12 per cent of China’s crude imports.
At the same time, it is essential to consider China’s energy security requirements. The country consumes 15 per cent and produces 5 per cent of global oil supplies each day, rendering energy security a significant concern for Xi, as manufacturing, the backbone of the Chinese economy, accounts for at least 55 per cent of national energy consumption. Importantly, the Strait of Hormuz and the Strait of Malacca together have handled more than half of China’s total oil imports, despite Iran’s relatively small share, making any closure of the route highly problematic for Beijing. While China’s oil reserves can sustain approximately seven months, uncertainties surrounding Hormuz are compelling it to seek alternative solutions.
Owing to long-term energy security concerns, China imposed a comprehensive ban on fuel exports as soon as the Hormuz crisis broke out, following the global price increase. Furthermore, the Chinese government intervened twice to halt planned fuel price rises as a means of maintaining social stability, given its stagnating economy, which is characterized by an overcapacity in manufacturing that relies on oil and cannot be offset by the already weakened real estate sector. Moreover, Beijing has long encouraged consumers to purchase electric vehicles through subsidies, and the country’s competitive market has made such vehicles more affordable than petrol or diesel alternatives.
These measures have thus far maintained public confidence in the Chinese authorities, as daily life for most people in employment has not changed significantly. However, there is little doubt that China is engaged in long-term planning, particularly in anticipation of a worst-case scenario involving sustained disruption at the Strait of Hormuz. Accordingly, China is pursuing deeper energy cooperation with Russia and the Central Asian states, with Lavrov agreeing to assist Xi in addressing Hormuz-related energy insecurity. No details of these negotiations have been released regarding the prices China will pay, although Russian energy is likely to be discounted due to US sanctions on Moscow.
The trade war between the US and China has fueled tensions in diplomatic relations since the first Trump presidency, drawing Beijing and Tehran closer in strategic cooperation. While Chinese foreign policy has consistently avoided direct intervention in armed conflicts, indirect support remains commonplace, as exemplified by Xi’s assistance to Putin during the Russia-Ukraine war. Similarly, Iran has utilized Chinese satellite technology to target American bases in the Middle East, given that access to American GPS services is restricted by sanctions. Although such wartime cooperation has been confirmed by Iran’s foreign minister Araghchi, Trump has unilaterally claimed that Xi would not transfer weapons to Iran.
US-China relations feature numerous challenges across multiple fronts, yet Trump’s explicit threat of tariffs towards China, and the apparent positive response it has elicited, is unusual, particularly when compared with the more assertive ‘wolf-warrior’ style of Chinese foreign policy a decade ago. Xi recognizes that Trump urgently needs to improve his public image ahead of the forthcoming midterm elections, as the Iran war has been widely criticized by American voters, and the scheduled state visit to China in May presents a significant opportunity for Trump to demonstrate political achievements. Therefore, the Chinese government is carefully calibrating the balance between energy insecurity and international relations amid prevailing uncertainties.
The outlook for the Hormuz crisis remains uncertain, as past ceasefire efforts have demonstrated. Nonetheless, China may choose between diversifying its energy supply, pursuing superpower collaboration, or adopting a combination of both. In the former scenario, which China has already pursued for several years, it will be difficult to establish a new equilibrium that fully aligns with the country’s economic development targets. Fiscal reassessments will also be required if alternative oil suppliers charge higher prices than Iran. In addition, persistently high youth unemployment and a slowing market could further exacerbate China’s already troubled economy if Beijing chooses to reduce manufacturing output to lower energy demand.
Cooperating with the US on the Hormuz crisis presents a double-edged sword for China. On the one hand, the international community and the Chinese public may perceive Beijing as aligning with Washington on certain principled issues, potentially constituting a direct violation of the Iran-China comprehensive strategic partnership agreement, which was originally intended to circumvent US sanctions. On the other hand, Xi’s cooperation with Trump to end the Iran war could significantly enhance China’s superpower standing on the global stage, a central objective of his ideological emphasis on the “great rejuvenation” of the Chinese nation. It is therefore likely that China will seek to pursue both approaches in a carefully balanced manner.
In summary, the US-Iran war and the blockade of the Strait of Hormuz have produced limited yet significant ramifications for China. With access to discounted Iranian oil constrained, strategic reserves capable of sustaining approximately seven months have become more important in Beijing’s planning. China has also intensified engagement with Russia and Central Asian states to secure alternative energy supplies, highlighting concerns over energy insecurity and its domestic implications. More broadly, these pressures shape China’s response not only in terms of supply security but also great-power positioning. As Trump continues the Iran war and prepares to visit China, Xi must balance energy demand with global influence.
