China is taking the brunt of the Israel-Iran conflict’s economic fallout, as its heavy reliance on Iranian crude oil leaves Beijing more exposed than Washington, while the war threatens to upend China’s ambitions for energy security and Middle East influence.
At a Glance
- China relies on Iranian crude for nearly 90% of its sanctioned “teapot” refinery supply
- Tanker rates through the Strait of Hormuz have doubled amid regional instability
- Iran’s oil exports to China continue via shadow fleet, but under rising cost and risk
- China risks diplomatic isolation as its backing for Tehran could trigger U.S. countermeasures
- Analysts say Beijing is the biggest loser in this regional crisis
Energy Dependence Exposed
China’s economic vulnerability starts with energy: nearly 90% of Iran’s oil exports go to China, where small “teapot” refineries depend on steep discounts made possible through backchannel arrangements. According to The Wall Street Journal, these flows are now threatened by missile strikes on Iran’s Kharg Island export hub and volatility in the Strait of Hormuz.
Soaring Transport Costs
The price of moving oil has surged. The Financial Times reports that rates for very large crude carriers transiting the Strait have more than doubled—jumping from around $20,000 to nearly $48,000 per day—as shipowners steer clear of the high-risk zone. These rising costs are squeezing Chinese refiners and forcing some to consider scaling back purchases.
Iran’s Shadow Fleet Under Strain
Even as Iran adapts—maintaining exports via “dark fleet” tankers—overall volumes remain under pressure. Reuters reports that while crude loadings briefly spiked in early June, tanker activity now shows signs of strain as insurance rates climb and key export routes remain threatened.
Beijing’s Diplomatic Dilemma
China’s strategic posture is also fraying. According to The Times of India, foreign policy analyst Gordon Chang warns Beijing could face retaliation or be drawn into proxy skirmishes if its tacit support for Tehran persists. And with little diplomatic leverage over either Israel or Iran, China’s role as a neutral broker appears weakened.
U.S. vs. China: Uneven Exposure
With its own domestic energy production and diversified imports, the U.S. economy remains far less exposed. Analysts argue that Beijing is left with few good options—its deep energy dependence on Iran now a strategic liability in a fast-moving regional crisis.
As Israel and Iran edge toward deeper confrontation, China’s Middle East ambitions face their sternest test. The longer the war drags on, the higher the costs for Beijing—in lost oil, lost influence, and growing global isolation.
