Will china help reopen Hormuz?

The long-awaited visit of U.S. President Donald Trump to Beijing to meet Chinese President Xi Jinping took place on Thursday. According to the U.S. State Department, both sides agreed that tolls should not be imposed on vessels transiting the Strait of Hormuz. However, it remains unclear how far China is willing to use its leverage over Iran to help reopen the waterway.

Vessel traffic through Hormuz began falling sharply shortly after the war started on 28 February. Crossings through the strait remain in the single digits, while supply disruptions from the region have already exceeded 800 million barrels and are expected to rise further if the stalemate continues.

Despite China’s heavy reliance on the strait—through which roughly 40% of its oil imports pass—Beijing appears to be pursuing a strategy of deliberate patience, allowing Washington to become increasingly entangled in a costly and open-ended confrontation with Iran. What initially appeared to be a decisive show of force has, due to poor forward planning, evolved into a stagnant and prolonged conflict. The Strait of Hormuz remains restricted by Iran, while the threat of further escalation continues to loom over the region. Despite the grand rhetoric, it is becoming increasingly clear that Trump wants to see both an end to the conflict and the reopening of Hormuz.

China can afford to wait. Visible oil inventories in China exceed 1.1 billion barrels and, according to recent data, continue to build. In fact, China appears so confident in their position that they’ve been willing to export crude oil—and reportedly even reexport barrels that would normally have been retained for domestic imports—while simultaneously reducing import volumes. Despite this, Chinese inventory levels have not shown meaningful declines.

Nevertheless, Beijing also has reasons to want the conflict resolved. Earlier this year, Trump’s intervention in Venezuela and tighter control over Venezuelan oil exports cut off discounted, sanctioned barrels flowing to China. As a result, safeguarding supplies from Iran has become increasingly important for Beijing. Moreover, China’s economy — heavily dependent on export demand — would hardly benefit from a prolonged closure of the strait, which could trigger broader global economic weakness. Our base case scenario at the moment assumes an improved rate of traffic from the strait by August.

During Trump’s visit, Xi reportedly stated that China would not supply Iran with military equipment. It remains unclear whether Xi raised Washington’s plans to supply military equipment to Taiwan, an issue many had expected him to address. However, Secretary of State Marco Rubio said U.S. policy toward Taiwan remains “unchanged” following Trump’s meeting with Xi while also warning that it would be “a terrible mistake” for China to take Taiwan by force.

One of Trump’s key objectives during the visit was reportedly to persuade China to purchase more U.S. crude instead of Iranian oil. However, such a shift appears unlikely. Beijing has repeatedly disregarded U.S. sanctions restrictions, with China’s independent “teapot” refineries continuing to buy the lion’s share of Iranian crude exports.

In what appears to be a gesture of support from Tehran toward Beijing, Iran said it had begun allowing some Chinese vessels to transit through the Strait of Hormuz following an understanding over Iranian management protocols for the waterway, according to the semi-official Fars news agency, citing an informed source.

Meanwhile, the NITC-controlled VLCC Huge, carrying an estimated 2 million barrels of Iranian crude, has resurfaced in satellite imagery near the Vietnamese coast after disappearing from AIS coverage earlier this month. The vessel was last seen on AIS on 3 May while transiting the Lombok Strait before going dark again. Fresh satellite imagery captured on 13 May shows the Huge moving northward past Vietnam, strongly suggesting the tanker is continuing toward China.

Can the Petrodollar Survive Middle East Conflict?

Beyond the obvious energy supply concerns stemming from restrictions in the Strait of Hormuz, the conflict in the Middle East is placing the petrodollar system under significant stress. While the system will most likely survive, it could emerge weaker as energy payments become increasingly fragmented across multiple currencies. Prior to the conflict, JP Morgan stated that 20% of global oil was traded in non USD currencies, which is likely to rise after the conflict.  

More recent reporting since the outbreak of the conflict suggests the greater risk to the petrodollar system is not outright replacement but gradual fragmentation. While the U.S. dollar still dominates global reserves, commodity financing, shipping insurance, and energy derivatives markets, an increasing share of bilateral oil trade is being settled in regional currencies, particularly among sanctioned or politically aligned states. In this sense, the conflict may accelerate the emergence of a more multipolar energy payment system even if it does not fundamentally displace the dollar’s central role in global finance.

India, for instance, has increasingly paid for Russian crude imports over the past several years using a mix of currencies, including the Chinese yuan, UAE dirham, Indian rupee, and U.S. dollar. According to shipping sources, Iran has also begun charging some vessels transit tolls in yuan, effectively turning its newfound control over the strait into an active de-dollarization mechanism.

However, the structural foundations supporting the dollar remain significant. Gulf states have so far refused to adopt Iran’s toll system and still rely, to varying degrees, on the United States for regional security and defense equipment. In addition, many Gulf currencies remain pegged to the dollar, reinforcing continued alignment with the U.S.-led financial system.

While China helped facilitate the restoration of diplomatic relations between Saudi Arabia and Iran, Beijing still shows little appetite for assuming a broader foreign policy or security role in the Middle East. Concerns over transparency in China’s energy, financial, and economic data also remain a factor for many regional states. As a result, although Gulf countries may continue diversifying their geopolitical relationships, U.S. influence in the region is still likely to prevail.

Will China Actually Help?

Despite the broader implications for global energy markets and the dollar system, the central question remains whether China is ultimately willing to use its leverage over Iran to help restore stability in the Strait of Hormuz.

Ultimately, China is likely to support efforts to gradually reopen the Strait of Hormuz, but only within carefully defined limits. Beijing appears reluctant to assume direct responsibility for regional security or become deeply entangled in a military confrontation involving Iran. Instead, China’s strategy so far has been to preserve flexibility: maintaining ties with Tehran, benefiting from discounted sanctioned crude, and allowing the United States to bear the primary military and political burden of securing the waterway.

However, China also has clear economic incentives to prevent a prolonged disruption. A sustained closure of Hormuz would threaten global growth, undermine Chinese export demand, and place increasing strain on Asian energy markets. As a result, Beijing will likely continue applying quiet diplomatic pressure on Tehran to avoid further escalation while publicly positioning itself as a stabilizing actor.

In practice, this means China may help facilitate a reopening of Hormuz through diplomatic engagement and economic leverage over Iran but is unlikely to play a direct enforcement or security role comparable to that of the United States.

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