China faces complex calculations… U.S. pressure eases amid war, but crude oil risks rise

U.S. focusing diplomatic and military power on the Middle East

China gets a brief respite in trade negotiations

Half of crude oil imports depend on Iran

Supply disruptions likely if the Strait of Hormuz is blocked

As the U.S. directly intervenes militarily in the conflict between Israel and Iran, China's position is becoming more complicated. The Middle East is considered a key pillar in China's energy sourcing and diplomatic strategy. Particularly, there are concerns that if the Strait of Hormuz is blocked, China could lose half of its total crude oil imports. On the other hand, some suggest that, with U.S. diplomatic and military resources diverted to the Middle East, China may strengthen its maritime supremacy in the Pacific region, including the South China Sea and the Taiwan Strait.

◇Concerns over crude oil imports and Belt and Road disruptions

The South China Morning Post (SCMP) in Hong Kong analyzed on the 23rd that "the current Middle East conflict could structurally alter China’s security and diplomatic strategy." Given China’s significant economic interests in the region, it is expected the ripple effects will be substantial. Xu Weijun, a researcher at the South China University of Technology, said, "Instability in the Middle East can directly hit China's overseas investment and supply chains," and added, "The Strait of Hormuz is a core route through which over half of China's imported crude oil passes, and if it is blocked, it would not only shock energy procurement but the broader economy as well."

China maintains a close economic partnership with Iran. As of 2023, China’s direct investment in Iran reached $322 million, with cumulative investment exceeding $3.9 billion. In 2024, bilateral trade volume was $13.37 billion, with China registering a trade surplus of $4.49 billion.

As a result, if U.S. sanctions on Iran intensify, state-owned enterprises such as China National Petroleum Corporation (CNPC) would be exposed to such sanction risks. The normalization of Saudi Arabia-Iran diplomatic relations, brokered by China in 2023, could also be nullified by the current situation. Furthermore, if Iran slips out of China’s orbit, the entire 'Belt and Road Initiative' (the Silk Road connecting China, Central Asia, and Europe by land and by sea) could fracture. Experts evaluate that China has built economic cooperation not just with Iran but also with Saudi Arabia and the United Arab Emirates (UAE) to hedge against such geopolitical risks. However, this crisis is seen as shaking China's overall balancing strategy.

◇Possible expansion of Chinese influence

Some argue that this situation could actually present opportunities for China. With the U.S. shifting its diplomatic focus to the Middle East, China could strengthen naval activities and boost its regional influence in the Pacific, including the South China Sea and Taiwan Strait.

Additionally, some interpret the strike itself as a U.S. attempt to weaken Iran, China’s diplomatic base in the Middle East, to gain an advantage in the power struggle. However, medium- to long-term U.S. focus on the Middle East could lead to ‘strategic fatigue,’ and strategic cooperation between China and Russia may be reinforced, according to some analyses.

It is also forecasted that the U.S.-China trade talks may be indirectly affected. Xu Tianchen, chief economist for China at the Economist Intelligence Unit (EIU), said, "The U.S. military intervention could delay the U.S.-China tariff negotiations," and "the agreed deadline, set for mid-August, could be postponed by about three months." He added, "Instability in Iran will have a direct impact on China’s crude oil trade."

Meanwhile, the Embassy of China in Israel announced in a statement on the 21st that about 300 of its nationals were evacuated via the Israel-Egypt border. The embassy stated, "With conflicts between Israel and Iran escalating, the scale of missile attacks and casualties is increasing," and "most foreigners in Israel have evacuated or are in the process of evacuation, while land borders are congested and international flights are increasingly restricted."

Reporter Lee Hye-in hey@hankyung.com