China has condemned Washington’s threat to impose secondary sanctions on companies and financial institutions trading with Iran, warning that it will take “all necessary measures” to protect its legitimate interests. The dispute risks creating another major source of tension between the world’s two largest economies as the United States attempts to isolate Tehran.
Beijing rejects US pressure
Chinese Foreign Ministry spokesperson Lin Jian said commercial cooperation between China and Iran complied with international law and should not be disrupted by another country.
Beijing described the proposed restrictions as illegal unilateral sanctions and repeated its position that economic pressure would not resolve the conflict involving Iran. China has instead called for negotiations, a ceasefire and the restoration of secure navigation through the Strait of Hormuz.
The statement indicated that China does not intend to voluntarily end its economic relationship with Tehran, despite the possibility that Chinese businesses could lose access to the American financial system.
Iranian oil remains central
China is the largest buyer of Iranian crude, purchasing more than 80 per cent of Iran’s shipped oil according to 2025 industry estimates. The trade provides Tehran with vital export revenue while giving Chinese refiners access to discounted energy supplies.
Much of the oil is handled through smaller companies, intermediaries and complex shipping arrangements designed to reduce exposure to existing US restrictions. Sanctioning major Chinese banks involved in settling those transactions would carry substantially greater risks for the global financial system.
Washington launches broader campaign
US Treasury Secretary Scott Bessent announced an initial package targeting 60 individuals, companies and vessels accused of supporting trade with Iran. The measures form part of a campaign named Operation Economic Outcast, which Washington says is intended to sever Iran’s international financial connections.
Major Chinese financial institutions were not included in the initial list. However, Bessent warned that no organisation would remain beyond the reach of American sanctions and said entities facilitating Iranian transactions could be removed from the US dollar system.
President Donald Trump has also threatened economic consequences for countries providing Iran with financial or commercial support.
Risk of a wider confrontation
Targeting major Chinese institutions could provoke retaliation from Beijing and expand the dispute beyond Iran. China could respond through restrictions on critical-mineral exports, regulatory action against American companies or counter-sanctions under its domestic legislation.
Such measures could disrupt technology, automotive and defence supply chains that depend on Chinese rare earths. They could also undermine efforts to stabilise US-China relations before another expected meeting between Trump and Chinese President Xi Jinping.
Washington’s caution reflects the difficulty of pressuring Iran without creating a separate economic confrontation with China.
Markets assess the consequences
Oil prices initially declined following the US announcement, suggesting traders viewed renewed economic pressure as less likely to interrupt supplies than further military escalation. However, crude prices remain elevated because of uncertainty surrounding Iran and restricted commercial traffic through the Strait of Hormuz.
The effectiveness of the new campaign will depend heavily on whether China, India, Turkey and other trading partners reduce their dealings with Iran. Beijing’s response indicates that international compliance cannot be assumed.
The confrontation therefore represents more than a dispute over Iranian oil. It is becoming a test of Washington’s ability to enforce sanctions against businesses connected to a major economic power capable of imposing significant costs in return.
Newshub Editorial in Asia – 27 August 2026
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