Oil drops under $100 after China challenges U.S. Hormuz blockade

U.S. oil futures fell below $100 per barrel on Monday after China’s defense minister announced Chinese vessels would continue transiting the Strait of Hormuz, directly challenging a U.S. naval blockade of Iran and prompting traders to reassess supply risk.

Crude had climbed above $104 earlier in the session before reversing when Admiral Dong Jun declared, “Iran controls the Strait of Hormuz and it is open for us.” The remark shifted the standoff from a bilateral U.S.-Iran confrontation to one involving a major global power.

The developments follow the collapse of U.S.-Iran talks in Islamabad on April 12 and Washington’s declaration of a full naval blockade of the strait. Speaking from the Oval Office, President Donald Trump set a two-week deadline for Iran to reach an agreement and warned the situation “won’t be pleasant” if Tehran fails to comply by April 27.

The entry of China into the dispute prompted a rapid repricing in oil markets as participants weighed whether Beijing would assert its trade and energy ties with Tehran and how that could affect the blockade’s effectiveness. China is Iran’s largest oil export destination, and tanker routing through the strait influences Beijing’s energy flows.

Reports indicated at least one tanker bound for China was turned back under the U.S. blockade, though details about the vessel and its cargo were limited. Those reports added to volatility during the session.

The Strait of Hormuz is a narrow shipping lane that channels oil from the Persian Gulf to global markets. Any disruption there can quickly affect supply expectations and price swings.

Prices remained volatile ahead of the April 27 deadline, with market participants watching diplomatic developments, tanker movements and public statements from the U.S. and Chinese governments for signs of escalation or resolution.