Geopolitical Risks and Global Oil Trade Reshaping from U.S. 25% Tariffs on Iran-Trading Nations

Based on my comprehensive research, I will provide a systematic analysis of the geopolitical risks and potential reshaping of global crude oil trade flows resulting from the U.S. 25% tariffs on Iran-trading nations.

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On February 6, 2026, President Donald Trump signed an executive order imposing a 25% tariff on imports from countries that directly or indirectly purchase, import, or otherwise acquire goods and services from Iran [1]. This policy represents a significant escalation in U.S. secondary sanctions enforcement and carries profound implications for global oil markets, geopolitical alignments, and the accelerating shift toward alternative payment systems, particularly the Chinese yuan (RMB) settlement mechanism.

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The executive order establishes that any goods imported into the United States from countries engaged in trade with Iran may be subject to an additional 25% ad valorem tariff. This applies retroactively from the date of the order’s生效 [1]. The policy targets nations that have maintained commercial relationships with Tehran, particularly in the energy sector where China has emerged as Iran’s primary oil customer.

China imported approximately 80% of Iran’s oil exports in 2025, providing critical revenue for Tehran amid stringent international sanctions [2]. Other significant trade partners include India, Turkey, and the United Arab Emirates, all of which now face a stark choice between their U.S. commercial relationships and their Iranian energy imports.

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The tariff policy threatens to reignite the broader US-China trade conflict. China has been Iran’s top trading partner since 2016, and the new tariffs directly challenge Beijing’s energy security strategy [2]. The Chinese Embassy in Washington responded with a formal statement condemning the measure:

“China’s position against the indiscriminate imposition of tariffs is consistent and clear. Tariff wars and trade wars have no winners, and coercion and pressure cannot solve problems. China firmly opposes any illicit unilateral sanctions and long-arm jurisdiction and will take all necessary measures to safeguard its legitimate rights and interests.” [3]

• Escalation of retaliatory tariffs between the world’s two largest economies
• Disruption of existing trade agreements and negotiations
• Acceleration of economic decoupling in strategic sectors

The tariff regime creates pressure on traditional US allies in the Middle East, particularly the UAE and Saudi Arabia, which maintain complex trade relationships with Iran despite political tensions. These nations must now navigate between maintaining their U.S. security partnerships and preserving regional economic stability.

• Strain on US-Gulf Cooperation Council (GCC) relationships
• Increased incentive for regional reconciliation initiatives
• Enhanced Iranian leverage through energy market diversification

Heightened tensions between the U.S. and Iran increase the probability of military incidents in the Strait of Hormuz, through which approximately 20 million barrels per day of oil transit [4]. Recent incidents, including the U.S. military shooting down an Iranian drone that approached the USS Abraham Lincoln carrier group, demonstrate the fragility of the current situation [5].

Oil prices have exhibited significant volatility, jumping approximately 3% following reports that U.S.-Iran nuclear talks were on the verge of collapsing [5]. BloombergNEF projects that oil prices could reach $91 per barrel in late 2026 under disruption scenarios [4].

India, which significantly reduced Iranian oil imports during Trump’s first term due to sanctions pressure, now faces a renewed decision point. The country must balance its energy security needs, its strategic partnership with the United States, and its desire to maintain diversified supplier relationships.

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China, Russia, and Iran have already established an alternative oil market where transactions are denominated in Chinese currency and conducted via tankers operating outside Western jurisdictions [6]. This “shadow oil trade” network has grown substantially, providing a template for circumventing U.S. secondary sanctions.

Feature	Description
Currency	Chinese yuan (RMB) settlement
Shipping	“Shadow fleet” of tankers outside Western insurance/registry
Financial Infrastructure	CIPS (Cross-Border Interbank Payments System)
Key Participants	China, Russia, Iran, select BRICS nations

The tariff policy is accelerating existing trends toward trade fragmentation:

• Iranian oil → Chinese independent refiners (discounted prices)
• Traditional dollar-denominated spot market
• Western financial system intermediation

• Expanded RMB-denominated oil trade
• Increased use of barter arrangements
• Development of alternative shipping and insurance infrastructure
• Potential entry of additional BRICS members into yuan-based oil settlements

Iran’s position within OPEC+ becomes more complex under this new regime. While Iran is not among the largest oil producers, Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, noted: “If we were to get a confrontation between the U.S. and Iran that led to the loss of Iranian oil exports, there just isn’t a lot left in the OPEC tank to cover that” [7].

This dynamic creates two potential scenarios:

1. Supply Gap Scenario:
   Disruption of Iranian exports creates a supply shortfall that cannot be quickly compensated by other producers
2. Market Fragmentation Scenario:
   Two parallel oil markets emerge—one dollar-denominated, one yuan-denominated—with different pricing dynamics

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China’s strategy to internationalize the yuan has found its most significant application in energy trade. The development of the “petroyuan” framework represents a direct challenge to dollar dominance in global energy markets.

The Cross-Border Interbank Payments System (CIPS), China’s alternative to SWIFT, has expanded to connect 185 countries, enabling international payments in yuan without using the U.S. dollar [8]. This infrastructure provides the technological foundation for RMB-denominated oil settlements.

China and Russia settled approximately $240 billion in yuan and ruble transactions in 2023 alone [8]. Saudi Arabia’s participation in BRICS and acceptance of yuan for certain oil payments represents a significant symbolic and practical milestone in de-dollarization efforts.

The traditional oil payment architecture—based on dollar settlement, Western banking intermediation, and SWIFT messaging—is being challenged by:

Traditional System	Emerging Alternative
USD denomination	RMB denomination
SWIFT messaging	CIPS system
Western banking	China-based banks
G7 jurisdiction	BRICS-aligned jurisdiction
Western insurance	Alternative insurance pools

Despite progress, significant barriers remain to yuan dominance in oil trade:

1. Liquidity Management:
   Foreign entities need to maintain RMB balances, requiring access to Chinese capital markets
2. Hedging Infrastructure:
   Limited yuan-denominated derivatives for commodity price risk management
3. Store of Value Concerns:
   Questions remain about the yuan’s long-term credibility as a reserve currency
4. Geopolitical Risk:
   Potential secondary sanctions on institutions participating in yuan-based Iranian oil trade

As Miao Yanliang, Chief Strategist at CICC and former SAFE Chief Economist, noted: “China’s test is domestic after peak dollar; economic strength and trade scale are merely the ‘necessary foundation’ and ‘the most visible and, in relative terms, the easiest to expand.’ The far more grueling test is domestic: building the institutional credibility required for the world to trust a currency as a long-term store of value” [6].

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Under this scenario:

• China maintains Iranian oil imports while seeking workarounds
• Oil prices experience moderate volatility ($75-85/bbl range)
• RMB share in oil trade increases to 15-20% over 24 months
• Trade tensions remain contained but persistent

Under this scenario:

• China refuses compliance, triggering 25% tariffs on Chinese goods
• Iranian oil exports face complete cutoff
• Strait of Hormuz disruption risk increases significantly
• Oil prices spike above $100/bbl
• Accelerate dedollarization with yuan share reaching 30%+

Under this scenario:

• US-Iran negotiations produce breakthrough
• Tariff policy is waived or modified for compliant nations
• Oil prices stabilize below $75/bbl
• RMB internationalization continues at measured pace

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1. Geopolitical Fragmentation:
   The U.S. tariff policy accelerates the fragmentation of the global economic order into competing blocs, with energy trade becoming a primary battlefield.

2. Dedollarization Acceleration:
   Secondary sanctions are driving the development of alternative payment infrastructure, with CIPS and RMB settlement gaining significant traction.

3. Oil Market Bifurcation:
   The emergence of parallel oil markets—one dollar-denominated, one yuan-denominated—appears increasingly likely.

4. Regional Realignment:
   Gulf states face pressure to balance U.S. security relationships with economic realities, potentially leading to hedging strategies.

5. Volatility Regime:
   Oil price volatility is likely to increase as markets price in geopolitical risk premiums and structural trade flow changes.

• Energy Sector:
  Diversify supply chains and consider geopolitical risk premiums in valuation models
• Financial Institutions:
  Prepare for increased RMB settlement volumes and CIPS integration
• Multinational Corporations:
  Develop compliance frameworks for complex sanctions environments
• Investors:
  Monitor BRICS payment infrastructure developments as leading indicators of dedollarization trends

The U.S. 25% tariff on Iran-trading nations represents a watershed moment in the evolution of global energy trade. While the immediate impact may be measured in tariffs and trade volumes, the longer-term consequences—potentially including the emergence of a genuinely multipolar monetary system in energy trade—could reshape the foundations of international economic relations.

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[1] CCTV News - White House Statement on Iran Tariff Executive Order (https://news.cctv.com/2026/02/06)

[2] Al Jazeera - “Trump announces new 25% tariff: How will it impact Iran’s trading partners?” (https://www.aljazeera.com/news/2026/1/13/trump-announces-new-25-tariff-how-will-it-impact-irans-trading-partners)

[3] Chinese Embassy Statement on US Tariffs (https://www.youtube.com/watch?v=66qS1SgBp6s)

[4] BloombergNEF - “Oil Can Hit $91 a Barrel in Late 2026 on Iran Disruption” (https://about.bnef.com/insights/commodities/oil-can-hit-91-a-barrel-in-late-2026-on-iran-disruption/)

[5] CNBC - “Oil prices jump on report US-Iran nuclear talks are collapsing” (https://www.cnbc.com/2026/02/04/oil-prices-jump-on-report-us-iran-nuclear-talks-are-collapsing.html)

[6] Perspective on Risk - “Dollar Developments” (https://perspectiveonrisk.substack.com/p/perspective-on-risk-jan-30-2026-dollar)

[7] CNBC - “Iran is not a major oil producer, but it still moves prices” (https://www.cnbc.com/2026/01/23/iran-protests-why-oil-markets-care-so-much-about-the-country.html)

[8] OMFIF - “BRICS considering petroyuan in next de-dollarisation attempt” (https://www.omfif.org/2024/09/brics-considering-petroyuan-in-next-de-dollarisation-attempt/)

[9] Asia Times - “Trump’s Iran tariff threat risks reigniting US-China trade war” (https://asiatimes.com/2026/01/trumps-iran-tariff-threat-risks-reigniting-us-china-trade-war/)

[10] AchillesChem - “Strait of Hormuz Confrontation 2026” (https://www.achilleschem.com/strait-of-hormuz.html)