Bessent tells House he will press China this weekend to cut Iran oil ties

Brent crude was at $108.20 a barrel toward 11:45 a.m. Eastern on Tuesday, up 2.4% on the session, U.S. regular gasoline averaged $4.32 a gallon as of Monday, and the 10-year Treasury yield was 4.989% after trading as high as 5.014%, the highest since 2007. The Federal Reserve began a two-day meeting the same morning and was widely expected to raise rates by 0.25 percentage point when that meeting ends Wednesday. Treasury Secretary Scott Bessent told the House Financial Services Committee he would press China this weekend to cut the oil and finance ties that still move Iranian barrels.

Bessent did not say China had agreed to a cutoff. The New York Times reported that he described “very good” private discussions with Chinese officials about Beijing severing economic ties with Iran, and said he would continue those conversations this weekend with Vice Premier He Lifeng, before a visit to the United States by President Xi Jinping later this month. President Trump said in July that Xi would visit on September 24.

What Bessent told the House

In his opening statement, Bessent said “the strength of our economy has allowed the United States to wage the greatest economic isolation campaign in the history of the world against the Islamic Republic of Iran and its enablers.” He added, of President Donald Trump: “Under his leadership, America is no longer managing the Iranian threat. We are ending it.” Asked by Representative Maxine Waters about a 5% 10-year yield and household borrowing costs, he said: “All else being equal, a higher 10-year Treasury yield generally leads to higher borrowing costs for companies and for consumers.” He had previously said he wanted that yield below 4%.

China still buys most of Iran's oil

The cutoff Bessent is describing is not a new map of Iran’s remaining oil trade. On April 28, the Treasury’s Office of Foreign Assets Control said China was acquiring around 90% of Iran’s total oil exports, with independent “teapot” refiners, smaller plants outside China’s state majors, taking the majority. OFAC named five of those plants and said some had used the U.S. financial system for dollar transactions and to buy U.S. goods. That 90% is Iran’s remaining market. For Beijing, Iranian crude was about 13.4% of the 10.27 million barrels a day of oil it imported by sea in 2025, or 1.38 million barrels a day. A Chinese decision to stop would still hit almost all of what Iran sells. It would also ask China to give up a discounted feedstock its teapot refiners still run, which is why He Lifeng’s answer is not a given.

A cutoff would land on those Shandong teapots, not on the listed China equity funds most holders own. The iShares MSCI China ETF AMCHI, graded A, the iShares China Large-Cap ETF BFXI, graded B, and the KraneShares CSI China Internet ETF CKWEB, graded C, hold banks and internet names. Energy is 3.8% of AMCHI and 5.1% of BFXI. They were down 0.6% to 1.1%, a session that has not repriced the China book.

The financial channel is the one Treasury has already been using on other countries’ banks. On Monday, OFAC designated Russia’s VTB Bank under Executive Order 13902 for Iranian sanctions evasion, including correspondent ties with sanctioned Iranian banks and steps to move billions of dollars of frozen Iranian assets through a rial-ruble settlement system. Bessent said Treasury would “continue to target and disrupt those who provide material, technological, or financial support that allows the Iranian regime to sustain its terrorist enterprise.” He did not name a Chinese bank on Tuesday.

The oil market a cutoff would hit

Any Chinese stoppage would land on a market the International Energy Agency already describes as short. In its September Oil Market Report, published September 11, the IEA projected 2026 world oil supply at 100.7 million barrels a day, down 5.7 million barrels a day from a year earlier, with a full recovery of Middle East supply deferred until 2027. It forecast global demand falling 2.5 million barrels a day this year. More than 10 million barrels a day of Gulf output remained shut in. Iranian production was 2.16 million barrels a day in August, down from 2.72 million in July, against sustainable capacity of 3.8 million.

Observed inventories had fallen another 95 million barrels in August, taking cumulative draws since February to 507 million barrels, or 2.8 million barrels a day. At the time of that report, ICE Brent futures were $105 a barrel, which the IEA put 45% above pre-war levels.

Libya’s National Oil Corp. said Tuesday that protests had halted production at three oil fields and that it might declare force majeure. West Texas Intermediate was at $104.74 a barrel, up 3.3%. The United States Oil Fund BUSO, graded B, which holds near-dated WTI futures, was at $159.94, up 2.1%, and had traded as high as $160.85, matching its 52-week high. Brent is up 11% over five sessions, 19% over a month, and 78% year to date.

The U.S. gasoline average is $1.14 above a year earlier, the inflation the Fed is meeting on.

As of August 21, China’s August intake of Iranian crude was 534,000 barrels a day, against that 1.38 million barrels a day in 2025. Tianyue Hu, an analyst at Rystad Energy, said in August that a complete halt “would probably have a limited immediate impact on China’s overall oil security, because imports from Iran have already fallen substantially and China still holds relatively large crude inventories.” Xi Jinping is due in the United States later this month. Taiyi Sun, an associate professor of political science at Christopher Newport University, told CNBC ahead of the trip that “the country with the greatest potential economic leverage over Tehran is also the country Washington can least afford to alienate before the September summit.” He Lifeng will hear the ask this weekend. On Sun’s read, Xi does not arrive with a reason to say yes.