Six months into the open military conflict between the United States and Iran, Beijing finds itself trapped in a complex geopolitical quandary: while some Chinese strategists view a prolonged drawn-out conflict as a strategic windfall that drains Washington’s military, financial and diplomatic resources away from the Indo-Pacific, the new unprecedented US economic campaign targeting third-party entities doing business with Tehran has put Chinese firms directly in the crosshairs, leaving Beijing navigating risky trade-offs between strategic gain and economic risk.
The latest escalation came Monday, when the US Department of the Treasury officially launched Operation Economic Outcast, a whole-of-government initiative aimed at fully isolating Iran and cutting off the global commercial networks that sustain its economy. As part of the opening round of the campaign, US regulators designated nearly 60 entities, individuals and vessels across five key sectors: digital assets, technology, precious metals, aviation and commercial shipping.
More than a quarter of the designated entities are based in Hong Kong and mainland China’s Shenzhen, accused of operating as front companies for procurement, logistics and shipping services that support Iran’s international trade networks. The Hong Kong-based firms added to the sanctions list include Sweet Ocean Industrial Ltd, RPT Technology Ltd, Sky Oil and Gas Asia Ltd and Vienna Shipping Co Ltd. The Shenzhen-based entities designated in the action are Shenzhen Sweet Ocean Technology Ltd, Shenzhen Huamei Lianyun International Logistics Co Ltd, Shenzhen Bositong Logistics Co Ltd and Bositong Supply Chain Shenzhen Co Ltd.
Speaking at the launch of the campaign on August 24, US Treasury Secretary Scott Bessent framed the initiative in historic wartime terms, drawing a parallel to the Allied D-Day invasion during World War II. “In the Second World War, D-Day marked the historic beginning of a campaign with our allies to target and drive the enemy from its positions, including those in third countries,” Bessent said. “Today, in that same spirit, we are launching an economic onslaught against Iran’s financial connections around the globe. Our objective is to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone.”
Bessent issued a stark warning to any third-party entities considering continued engagement with Iran: “Any entity that facilitates money laundering on behalf of Iran will be removed from the US dollar system. Let there be no ambiguity as to the position of the US. An economic engagement of any kind with this murderous regime will expose those responsible to the full reach of American power.”
The Treasury Secretary laid out two paths for Iran: complete international isolation, or a return to the global economy following a fundamental shift in its policy. He also gave non-complying governments a limited window to align with US sanctions before the Treasury takes unilateral action against entities within their borders.
This new round of sanctions comes just weeks ahead of a highly anticipated September 24 summit between US President Donald Trump and Chinese President Xi Jinping at the White House. The Chinese Foreign Ministry has already publicly rejected the new sanctions campaign, vowing to take all necessary measures to firmly protect the country’s legal economic interests and the rights of Chinese firms.
Reactions to the new sanctions among independent Chinese commentators are deeply mixed, with many warning that the indirect economic and geopolitical spillover for China should not be underestimated. “What Chinese readers really need to pay attention to in this round of US sanctions on Iran is not just whether Tehran can hold on, but that Washington has widened its target from Iran itself to outside players with energy, shipping or financial ties to the country,” noted Liaoning-based commentator Ciyuanjun. “China has been pulled directly into that expanded campaign.”
She added that the campaign is not merely a bilateral economic conflict between Washington and Tehran, warning that further expansion of secondary US sanctions would leave Chinese refining, shipping and trade finance firms with links to Iran facing growing operational uncertainty. Previous rounds of sanctions already targeted independent Chinese refiners and multiple mainland and Hong Kong-based entities, with the latest round adding even more Chinese commercial operations to the sanctions blacklist. While ordinary Chinese consumers have not yet felt immediate impacts, Ciyuanjun noted that further escalation could create broad ripple effects across the Chinese economy: if the Strait of Hormuz remains a high-risk shipping lane and sanctions expand, elevated energy costs will squeeze corporate profits, gradually eroding household purchasing power as cost increases pass through shipping, industrial feedstock and ultimately consumer prices.
Tinglan, a commentator for Chinese online outlet Zhouji Kuaibao, echoed these concerns, noting that China has long been one of the largest buyers of crude oil from the Middle East. “If Washington imposes secondary sanctions indiscriminately on normal international energy trade, it will inevitably hurt China and shake the stability of the global energy market,” she said. Tinglan also outlined multiple pathways Beijing could use to push back against the US campaign: China’s existing rules blocking the extraterritorial application of foreign laws are already actively enforced, barring domestic firms and banks from complying with unilateral US sanctions; Beijing frames its trade with Iran as legitimate commerce between sovereign states, and rejects US long-arm jurisdiction as a violation of the UN Charter; as a major global trading power and central supply chain hub, China can implement proportionate or more aggressive countermeasures, and US domestic pressures including persistent inflation and upcoming 2026 elections limit Washington’s willingness to risk a full economic rupture with Beijing; and Iran is expected to retaliate more forcefully against US interests in the Middle East, further stretching American resources.
The strains of successive sanctions rounds are already visible for China’s smaller independent oil refiners, colloquially known as “teapots,” which have long been major buyers of discounted Iranian crude. Since the US and Israel launched their military campaign against Iran on February 28, Washington has steadily tightened sanctions on the Chinese commercial networks that facilitate Iranian oil imports. Many sanctioned teapots have faced major operational disruptions: Shandong port operators have turned away tankers carrying Iranian crude, Chinese banks have cut off financing for oil purchases, and gasoline exports from key Chinese loading hubs have dried up since late March, pushing up domestic fuel prices. To date, however, the broader Chinese economy has absorbed these shocks without widespread systemic strain.
Bessent also confirmed Monday that the Treasury is preparing to sanction a major global financial institution within the coming week, though he declined to name the entity or its home country. When asked directly whether Chinese banks that finance Iranian oil imports could be the next target, he reiterated that no entity is beyond the reach of US secondary sanctions.
Even as Washington ramps up its pressure, the ongoing conflict has created the core dilemma shaping Beijing’s response. Some Chinese strategic commentators argue that a prolonged, grinding conflict in the Middle East serves China’s long-term geopolitical interests, by steadily consuming the weapons, funding and strategic attention that Washington would otherwise deploy to counter China’s influence in the Indo-Pacific. “The US attack on Iran may have unintentionally strengthened China’s own security,” observed Qinghai-based commentator writing under the pseudonym Time Brewery. “Intercepting one Patriot missile costs US$4 million, while the drone flying at it might cost only tens of thousands, and the more the Pentagon runs that math, the more alarming it looks.”
Time Brewery noted that US war game analyses have highlighted this stark cost mismatch: a five-month campaign against Iran has already consumed more than 1,500 Patriot interceptors, outpacing American defense manufacturers’ ability to replace stockpiles. Simulations show that swarms of low-cost Iranian drones can eventually overwhelm even advanced air defense systems, leaving multiple US military bases in the Middle East damaged. The commentator frames this as an unsolvable cost imbalance, not a purely military challenge, for the US. He added that American think tank models of a high-intensity conflict in the Western Pacific have already found that current US stockpiles of precision-guided weapons could be exhausted in less than a week, raising serious questions about Washington’s ability to sustain a major conflict near China’s borders, including over Taiwan.
China’s official state media has pushed back against the US campaign, arguing that Washington’s economic pressure will ultimately boomerang to harm American consumers and businesses through higher energy costs and disrupted global supply chains. State news agency Xinhua noted that global markets are already pricing in long-term disruption to oil shipments through the Strait of Hormuz, driving up costs for manufacturing, aviation and global transport, with the potential for crude prices to climb back above $100 per barrel. Xinhua warned that the shock could also spill over into a global food crisis, as the Persian Gulf region is a major supplier of the world’s fertilizer, and disrupted shipping will push up global food prices. Rising shipping costs from rerouted vessels and higher insurance premiums for routes near the Gulf and the Red Sea act as a hidden tax on global trade, the commentary noted, adding that combined shocks could leave major global economies including the United States facing slower growth and persistently higher inflation.
