Even before Donald Trump’s Presidential order for the blockade in the Strait of Hormuz, Israel’s attack on more than 100 places in Lebanon had violated the long-awaited and most complicated ceasefire agreement between the US and Iran. The seriousness of the Islamabad-brokered peace talks lies in the fact that while Iran considers Lebanon a core component of the ceasefire, arguing for the complete restoration of peace in the region, the US considers the “Strait of Hormuz” as central to the agreement, viewing Lebanon as a separate conflict in West Asia.
Looking at the historical trajectory of the conflict, many experts argue that nuclear enrichment has been the principal point of contention between the US and Iran. However, with the Strait of Hormuz emerging as the focal point of recent negotiations, the failure of these talks—and the US’ decision to deploy naval forces in the Strait—suggest that Washington’s actions may not be driven solely by concerns over Iran’s nuclear capabilities. Rather, they point to a broader strategic objective: securing influence over the Strait of Hormuz, a critical gateway for the global oil trade, through which nearly 20 per cent of the world’s crude supply passes.
To put it in context, China used to import more than 90 per cent of Venezuela’s total oil export, and that was traded in yuan. Later, the US invaded Venezuela and took control of the Venezuelan oil industry, indirectly stopping China from trading in yuan. China also imports around 90 per cent of Iran’s total oil exports, which were supposed to be yuan-denominated after the US attack on Iran.
The US naval blockade of the Strait of Hormuz suggests that it is attempting to replicate elements of the Venezuela strategy—leveraging control over energy flows while indirectly signalling to China the risks of expanding yuan-denominated trade.
A proxy battlefield
Whatever the consequences of this war may be, one of the most important aspects is that Iran, particularly the Strait of Hormuz, seems to be turning into a proxy battlefield between the US and China. China has already issued a warning against the US, stating that “it is Iran that controls the Strait of Hormuz, and it is completely open to us”. It has added that Chinese vessels will continue to operate in the Strait of Hormuz, as Beijing has bilateral economic ties with Iran.
As Trump’s presidential order on the blockade has already come into effect, it remains to be seen whether the US will allow Chinese vessels carrying crude from Iranian ports.
If access is denied, it will provoke China given the state of its economy following the supply chain disruptions and the conflict will most likely baloon into a larger regional conflict. If the US Navy allows access to Chinese vessels, the credibility of the presidential order will be significantly undermined, as it would send a message to the world that China’s economic and military capabilities are far stronger than those of the US. This would also signal that the US bullies only those countries that are weaker than the US.
At the Chiwan Container Terminal in Shenzhen, China, on February 27, 2026. China imports around 90 per cent of Iran’s total oil exports, which was supposed to be yuan-denominated after the US attack on Iran. | Photo Credit: Bloomberg
In this context, whatever decisions the US Navy takes will certainly give Iran an edge. While rising crude prices will be beneficial for Iran, Russia, and other oil-exporting countries, the overall global crisis arising from this supply chain disruption would foster negative sentiment towards the US and potentially strain the dominance of the dollar.
As US intelligence has indicated, China may be quietly supplying weapons to Iran. It is therefore plausible that, much like Ukraine, Iran could serve as a testing ground for advanced Chinese weaponry. At the same time, while China, Russia, and Iran may not be in a position to match US economic and military power in the short term, they could emerge as net gainers over the longer run, particularly if the US proves unable to sustain its current posture.
Keeping Trump’s recent America-centric hostile policy in mind, it can be argued that the global sentiment is gradually turning against the US.
Given the dominance of the US dollar in international transactions, any significant disruption to the US economy would have global repercussions. However, recent US policies are also accelerating a shift towards greater multilateralism, which, over time, could encourage efforts to diversify away from the dollar in international trade and finance.
Iran has already announced that it will charge a toll tax on ships passing through and will allow trade transactions in petroyuan as well as cryptocurrency.
Once things return to normal and the petroyuan replaces the petrodollar, the phrase “when America sneezes, the world catches a cold” may become history. As geoeconomics is the fundamental aspect of geopolitics, once the US’ economic hegemony declines, its geopolitical hegemony will automatically decline as well. It now remains to be seen how long—and to what extent—the US can sustain this self-generated conflict with Iran, which increasingly risks expanding into a wider regional confrontation in West Asia.
Sanjay Turi is a doctoral candidate at the Centre for West Asian Studies (CWAS), School of International Studies (SIS), Jawaharlal Nehru University.
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