China’s trade with Iran and Gulf countries fell sharply in March as restrictions on the Strait of Hormuz tightened amid the US-Israeli war on Iran.
Newly released data by Chinese customs showed imports from Iran plunged 48 per cent year on year last month, while exports to the country dropped 90 per cent.
Across the broader Middle East, exports to eight Persian Gulf economies – including Saudi Arabia and Qatar – fell by 57 per cent, while imports declined by nearly 33 per cent.
The disruption stems largely from the effective closure of the Strait of Hormuz – a narrow waterway that handles about 20 per cent of global oil. This curtailed crude flows, contributing to a 25 per cent year-on-year drop in China’s oil imports from Gulf countries in March.
The latest data followed Tehran briefly reopening the strait before reversing course within a day, as Washington maintained a naval blockade on Iranian ships and US President Donald Trump warned Iran not to “hold the US hostage”.
“The Strait of Hormuz has long been recognised as a global chokepoint, but it was not until this conflict that we realised how vulnerable it really is,” said Alfredo Montufar-Helu, managing director at Ankura China Advisors.
“The strait is no longer just a significant transit route for global energy markets, it is now a permanent geopolitical lever,” he said, adding that even a ceasefire was unlikely to remove the security premium in energy and maritime insurance costs amid continued risks.
Rising supply pressures could increase calls for a resolution, he said, but cautioned that a fundamental breakthrough in US-Iran negotiations would be required. “Unfortunately, there is currently no evidence that such a breakthrough is on the horizon,” he added.
Despite the closure, China’s increased shipments from Russia, Indonesia and Malaysia partly offset the shortfall, limiting the decline in overall crude imports to 2.24 per cent.
By contrast, sulphur supplies – more than half of which China typically sources from the Middle East – have been hit harder, falling 42 per cent during the conflict.
With a fragile ceasefire set to expire on Wednesday, the risk of renewed escalation is growing – uncertainty that is also feeding into US domestic politics. Trump’s approval rating has fallen to 37 per cent, according to an NBC News poll released on Sunday, over rising public dissatisfaction with his administration’s economic performance and its handling of the Iran conflict.
“I think pressure is building on the Trump administration to find some type of solution, particularly given that it’s an election year and that the midterms are unlikely to go in Trump’s favour in November,” said Nick Marro, principal economist for Asia and global trade lead at the Economist Intelligence Unit.
Elevated energy prices were likely to remain a crucial impetus for Trump to seek some kind of resolution, he added.
“That being said, that’s a lot easier said than done,” he added. “For some of the core requests by the US administration – such as Iran giving up its enriched uranium – that’s just a non-starter for Tehran.
“So the only thing we can really be certain of is that volatility is going to remain very high in the coming weeks.”
Major economies have faced their most severe oil supply shock since the crises of the 1970s, as they grapple with surging energy prices, jet fuel shortages and disruptions to fertiliser supplies following the war’s outbreak on February 28.