Lecturer in International Relations, University of Exeter
As US and Iranian envoys prepare to meet in Pakistan to explore a path out of the war, China is watching from further east—an influential but cautious actor that helped move diplomacy forward but is unlikely to become the guarantor Tehran would like.
The truce that emerged after six weeks of war remains fragile, even as diplomatic signals from Washington, Tehran and Islamabad suggest the meeting is likely to go ahead.
Amid the uncertainties and the mistrust, it was perhaps unsurprising that Iran’s ambassador to China, Abdolreza Rahmani Fazli, publicly expressed hope that Beijing could act as a guarantor of the process. The suggestion followed reports that China maintained contact with both Washington and Tehran during the diplomatic push that helped produce the ceasefire.
Yet when asked directly about such a role, China’s foreign ministry avoided any commitment, saying only that Beijing hopes “all parties can properly resolve disputes through dialogue and negotiation” and will maintain communication with those involved.
This episode reflects a broader pattern in China’s response to the war: exerting influence while avoiding commitment.
Beijing is engaged, but only up to a point. It maintains economic ties with Iran, continues to purchase its oil, and provides forms of support that help sustain the Iranian economy under pressure. Yet none of this amounts to the kind of backing Tehran would need in an existential conflict. There are no security guarantees, no military involvement, and no willingness to absorb significant strategic risks.
China’s limited readiness to intervene reflects both its capabilities and its priorities. Its actions are ultimately directed toward ensuring that the conflict does not disrupt its broader strategic agenda at minimal cost. Contributing to de-escalation can serve that objective, but only insofar as it advances clearly defined interests.
When the conflict began on February 28, Beijing was relatively well positioned to absorb the initial shock with the strategic reserves it had built up throughout 2025, the increasing electrification of its economy, and its vast domestic coal resources. It also soon became clear that Tehran could withstand the initial decapitation strikes.
At the same time, China’s regional strategy has increasingly shifted toward the monarchies across the Persian Gulf, reinforcing its preference for a balanced and non-committal posture.
The conflict also presents certain strategic opportunities. As the United States diverts military resources and political attention to the Middle East, pressure on China in the Indo-Pacific decreases. The war also offers insights into US military capabilities and operational patterns.
These advantages, however, depend on the conflict remaining limited. A prolonged war—such as the one that loomed when President Donald Trump warned that a “whole civilization will die”—poses significant risks.
China is poorly positioned to weather a global recession with ease. Exports remain essential for sustaining industrial output, growth and employment. A decline in external demand, combined with disruptions to key industrial and agricultural inputs, would therefore undermine a critical pillar of its economy.
Beijing wants stable relations with Washington, not least to buy time to strengthen its economy against future US pressure. In addition, the question of how to protect or evacuate the hundreds of thousands of Chinese nationals in the region would become increasingly urgent if the conflict escalated further.
It was under these conditions that China chose to act. On the one hand, it vetoed a Bahrain-sponsored resolution at the UN Security Council that—even in revised form—could have provided legal cover for further attacks against Iran. On the other, it helped create a diplomatic off-ramp to a US president in clear need of one.
China’s role in the crisis thus highlights both the reach and the limits of its influence. Beijing has demonstrated an ability to shape outcomes at critical junctures, but it remains unwilling to assume the responsibilities of a security provider. Its actions are highly context-dependent: had Washington shown no interest in de-escalation, or had diplomatic openings not emerged, China’s ability to intervene would likely have been far more limited.
The Chinese leadership, in other words, is not seeking to resolve the conflict as much as to manage its consequences. It intervenes not to build a lasting order, but to prevent outcomes that would damage its broader strategic agenda.
As long as that calculation holds, Beijing will remain an influential—but ultimately cautious and constrained—actor in Middle Eastern security.
The ceasefire announced on April 7 has offered temporary relief to the United States and, by extension, the global economy. Oil prices have since fallen below $100 per barrel, the Strait of Hormuz may finally reopen, and global stock markets have rallied, recovering part of the losses recorded over the previous 40 days.
The coming days may prove crucial for stabilizing seasonal supply chains, particularly for fertilizer inputs transiting the strait during the peak planting period in the Northern Hemisphere.
Inside Iran, however, the outlook is far more complex.
The war effectively froze Iran's economic crises, shuttered markets, and halted price discovery. A similar pattern followed the 12-day conflict earlier in the war, when markets closed temporarily before reopening to renewed upward pressure as underlying imbalances reasserted themselves. This time, the damage is far greater.
During US-Israeli airstrikes on Iran’s strategic infrastructure, attacks on Mahshahr and Asaluyeh petrochemical facilities hit sites Iranian officials say account for 85% of the country’s petrochemical export capacity.
The steel industry was also hit. Since these sectors supply downstream industries from plastics to automotive manufacturing and construction, the full scale of disruption has yet to be assessed.
The Tehran Stock Exchange has been closed for more than 40 consecutive days.
The head of the Securities and Exchange Organization has indicated that war-damaged companies will return to trading at a later stage, meaning that even if the exchange reopens, a significant portion of major firms may remain inactive.
Reopening without viable export-oriented companies could trigger heavy selling pressure in a market where banks and automakers are already loss-making and reliant on state support.
Inflation remains the most pressing crisis. Before the US-Israeli airstrikes, annual inflation had surpassed 70 percent — the highest since World War II. Food inflation reached triple digits, with bread and grains rising by 140 percent and cooking oil by more than 200 percent.
The war temporarily suppressed these pressures: demand fell amid unemployment, banking disruptions reduced the velocity of money, and property and automobile transactions slowed sharply.
With the Pakistani-brokered ceasefire, that suppressed demand is likely to return.
The fiscal picture offers no relief. The approved budget included a 65-percent rise in taxes, but roughly 60 percent of working-age individuals are currently unemployed.
In effect, the government is attempting to tax its way out of a fiscal crisis in an economy where the majority of working-age adults have no income to tax. Post-war military expenditures and reconstruction obligations have increased sharply, with no significant new revenue streams available.
Compounding this is the disruption of Iran's primary financial channel through Dubai, which for years served as a central hub for trade and currency transactions worth $16 billion to $28 billion annually.
Following recent attacks on Dubai, Emirati authorities reportedly detained dozens of currency dealers linked to Iran's Revolutionary Guard and shut down associated front companies.
Alternative channels in Herat and Erbil remain active but lack Dubai's scale. When suppressed demand for foreign currency returns, it will hit a narrower, less efficient set of channels, amplifying exchange rate volatility.
The ceasefire offered the world a reprieve. For Iran, it removed the only thing suppressing a crisis that had been building for months. When markets reopen, they will price in not only pre-war imbalances but the destruction of the export capacity that once generated foreign currency.
The rial will face a market that has every reason to reprice it sharply downward, and a state with fewer tools than ever to intervene. Iran's economy has not returned to its pre-war condition. It has moved past it.
Yet the ceasefire itself is fragile, reportedly violated several times within its first 48 hours. Even in the best-case diplomatic scenario, the technology and capital required for reconstruction will not materialize within weeks, and as long as the risk of renewed conflict remains, investors are unlikely to commit long-term capital.
What comes next at the negotiating table will shape whether any of it matters.
