US Weighs Iran Sanctions as Hormuz Blockade Keeps Oil Near $90

The Trump administration is weighing new sanctions on Iran that could target Chinese crude purchases, tightening an oil market already squeezed by the Hormuz blockade that has kept US gas prices above $4 a gallon.

"Washington has limited tools left that don't risk further escalation, but targeting the buyers — particularly China — is the logical next step," said Nathan Bomey, business reporter at Axios, on Bloomberg This Weekend.

WTI crude hovered near $90 a barrel this week as renewed violence in the region and fading hopes of a diplomatic breakthrough reversed gains from a brief ceasefire in June. The nationwide average price for regular unleaded stood at $4.04 on Wednesday, up from $3.88 a month prior and below $3 before the war began on February 28, according to AAA. California leads the nation at $5.58 per gallon, followed by Hawaii at $5.54 and Washington state at $5.15.

Additional sanctions targeting Chinese buyers of Iranian crude could push oil prices higher and deepen the political risk for Republicans heading into November's midterm elections, where 46 percent of Americans say gas prices have impacted how they plan to vote.

The Strait of Hormuz, which carried roughly 20 percent of global oil supply before the war, has been effectively closed since Iran restricted traffic in response to the US military campaign launched February 28. Pakistan's defense minister, Khawaja Asif, told Bloomberg on Tuesday that the warring sides were approaching "some sort of arrangement," but renewed strikes have kept markets on edge.

Carole Nakhle, CEO of the energy consultancy Crystol Energy, said the strait "remains the most important factor behind the increase in oil and therefore gasoline prices." She noted that "several risks" beyond the war are now overlapping, including the Strategic Petroleum Reserve falling below 300 million barrels for the first time since 1983 after Trump ordered the release of 172 million barrels in March.

China's Iranian Oil Purchases in the Crosshairs

Targeting Chinese buyers would mark a significant escalation in the sanctions campaign. China has been the primary purchaser of Iranian crude, and sanctions enforcement against Chinese entities could strain US-China trade relations at a time when both economies are already navigating tariff tensions. Treasury Secretary Scott Bessent suggested in a Newsmax interview that new economic measures to further damage Iran's economy could be unveiled in the coming days.

The sanctions consideration comes as Trump has floated declaring the Strait of Hormuz a US "territory" and collecting a 20 percent fee on products passing through the waterway — proposals that legal experts say would violate international law protecting free transit of commercial maritime vessels. Iran's deputy foreign minister, Kazem Gharibabadi, responded defiantly on social media, saying the strait "cannot be taken over by a tweet, nor by an aircraft carrier, nor by issuing a decree."

Midterm Political Calculus

The confluence of supply challenges poses a direct political risk for Republicans. A Harris Poll from early July found 95 percent of Americans believe the US is in an affordability crisis driven by rising costs of groceries, gas and other expenses. Only 32 percent of those interviewed for an AP-NORC poll in late July approved of Trump's handling of the economy, while 63 percent said the war in Iran had contributed to rising gas prices.

OPEC lowered its demand growth forecast for 2026 to 580,000 barrels per day from 780,000 in its previous report — the fourth consecutive downward revision — suggesting supply disruptions are affecting global consumption. The International Energy Agency said oil markets remain "heavily impacted" by the Hormuz closure, with previously available inventory buffers "rapidly depleting." The EIA expects most crude production in the region to return to near preconflict averages in early 2027, though disruptions of about 600,000 barrels per day are expected to continue through the end of next year.

If Washington follows through on sanctions targeting Chinese buyers, the impact could be immediate and significant. China's purchases of Iranian crude have been a key channel for Tehran's oil revenue, and cutting that flow would tighten global supply further. But it would also risk a Chinese response that could ripple through trade relations and global supply chains, adding to inflationary pressures across the broader market.

This article is for informational purposes only and does not constitute investment advice.