China and Iran seek to contain escalating Gulf tensions as Wang Yi met Araghchi at the SCO foreign ministers meeting in Kyrgyzstan, urging both sides to uphold a month-old memorandum and return to dialogue after the US-Iran standoff over the Strait of Hormuz threatened to disrupt global oil supplies.
Chinese Foreign Minister Wang Yi urged Iran and the US to uphold a memorandum signed just over a month ago as Gulf tensions escalated, meeting his Iranian counterpart on the sidelines of the Shanghai Cooperation Organization's foreign ministers gathering in Kyrgyzstan on July 24.
"The negotiating door, once opened, should not be shut," Wang told Iranian Foreign Minister Seyyed Abbas Araghchi in Cholpon-Ata, according to a statement from China's foreign ministry. "As long as there is hope for peace, it should not be abandoned." Wang, who is also a member of the Politburo of the Communist Party of China, reiterated Beijing's support for Pakistan's mediation efforts between Tehran and Washington.
Araghchi blamed the US for violating the understanding reached more than a month ago, which he said triggered the latest escalation. "Iran's willingness to negotiate has never changed, nor do we want the conflict to continue," Araghchi said, according to Chinese state media. He called on Washington to honor its commitments and show restraint. The Iranian foreign minister held parallel bilateral talks with Russian Foreign Minister Sergey Lavrov, Pakistani Foreign Minister Ishaq Dar and Chinese Foreign Minister Wang Yi, among others, during the two-day SCO session.
The Strait of Hormuz, through which about 21% of global oil consumption passes daily, has become the focal point of the standoff. Araghchi said protecting Iran's national interests in the waterway is among Tehran's "fundamental priorities." The last time Gulf shipping faced a comparable threat — following the 2019 attacks on Saudi Aramco's Abqaiq facility — Brent crude spiked 15% in a single session, adding roughly $12 per barrel to global fuel costs. Any disruption this time could be more severe given already tight global spare capacity, estimated by the International Energy Agency at roughly 4 million barrels per day.
Diplomatic push at the SCO
The SCO meeting, hosted under Kyrgyzstan's rotating chairmanship in the lakeside resort of Cholpon-Ata — designated the bloc's Tourism and Cultural Capital for 2025-2026 — marked the organization's 25th anniversary. Ministers signed 25 documents under nine separate decisions covering political, economic and security cooperation ahead of the upcoming leaders' summit.
Araghchi described the SCO as a "forward-looking organization" comprising major regional powers that seek to counter unilateral policies by the US and Western-led institutions. "Iran has shown that it will not succumb to American bullying and will not surrender to force, pressure or threats in any way," he told reporters after the session.
Market stakes
For global markets, the risk centers on oil supply disruption and safe-haven flows. Brent crude has historically added a geopolitical risk premium of $5 to $10 per barrel during periods of elevated Gulf tensions, according to data from the US Energy Information Administration. Gold typically benefits from such uncertainty, while equity markets in energy-importing nations across Asia face downside exposure to any sustained price spike.
Wang reiterated China's four-point proposal for Middle East peace and stability, first outlined by President Xi Jinping, calling for collective security arrangements among Gulf nations. "The most urgent task is to adhere to the direction of resolving disputes through negotiation and return to implementing the consensus of the memorandum," Wang said.
This article is for informational purposes only and does not constitute investment advice.
