Hormuz effect? How US, China are ramping up tensions over the Panama Canal

The Panama Canal has become a focal point of escalating US-China tensions, with both nations accusing each other of politicizing global shipping. The US and its regional allies claim China has detained Panama-linked ships, calling it a deliberate attempt to manipulate maritime trade. China has vehemently denied these accusations, labeling them hypocritical and accusing the US of undermining sovereignty. Analysts warn that any disruption to the canal could significantly impact global trade, causing supply bottlenecks and market volatility. This dispute occurs amid heightened tensions over the Strait of Hormuz, suggesting a broader trend of major powers contesting control of vital shipping lanes and potentially challenging existing maritime laws.

Iran's Supreme Leader, Mojtaba Khamenei, issued a defiant statement asserting Iran's control over shipping in the Strait of Hormuz and pledging to protect the nation's nuclear and missile programs. The statement, read on state television, declared a "new chapter" for the Persian Gulf and Strait of Hormuz, claiming Iran would secure the region and eliminate "enemy abuses." Khamenei vowed to guard Iran's technological capacities, including nuclear and missile programs, as national capital. This comes amidst a US counter-blockade of Iranian oil ports and reports of Khamenei's injury following his father's death. The statement suggests Iran's intent to implement a new fee regime in the strait, which is crucial for global oil transit.

President Donald Trump has warned Iran to comply with US demands regarding its nuclear program, stating that a US naval blockade could continue for months. Trump conveyed this message on Wednesday, reportedly after rejecting Iran's latest proposal to reopen the Strait of Hormuz. He urged Iran to "get smart soon" and indicated a willingness to extend economic pressure. The US naval blockade is aimed at compelling Iran to accept tighter controls on its nuclear activities. Trump's remarks were made via his social media platform, accompanied by a graphic image.

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The U.S. Navy has implemented a sea blockade against Iran, halting economic trade in and out of the country by sea, beginning Monday, according to U.S. Central Command. The blockade, enforced in the Gulf of Oman beyond the Strait of Hormuz, applies to all vessels entering or leaving Iranian ports, regardless of nationality. U.S. forces are intercepting vessels after they leave Iranian facilities and clear the Strait of Hormuz, forcing them to turn around. Shipping data indicates that Iran-linked or sanctioned vessels have altered course, stopping or turning around after leaving the Gulf. The U.S. military is using various methods beyond standard tracking beacons to identify ships originating from Iranian ports.

A Middle East analyst warns that Iran may direct its Houthi allies to disrupt the Bab al-Mandeb Strait if the U.S. blockades the Strait of Hormuz. The Bab al-Mandeb is a vital shipping route connecting the Red Sea and the Gulf of Aden, carrying approximately 12% of global oil shipments. This warning follows a statement from a senior advisor to Iran's Supreme Leader, who indicated that Iran views the Bab al-Mandeb with the same strategic importance as the Strait of Hormuz. The potential disruption of the Bab al-Mandeb could further strain global energy markets. The U.S. Central Command announced a naval blockade of Iranian ports, prompting concerns about Iran's possible retaliation.

China is advocating for a ceasefire in the Iran war to ensure the Strait of Hormuz remains open for international trade and energy transport. This comes as US President Donald Trump announced a large naval operation targeting the oil transit chokepoint. Chinese Foreign Ministry spokesman Guo Jiakun stated that the Strait's stability and unimpeded passage are crucial for global interests. According to Guo, the conflict involving Iran is the primary cause of disruptions in the Strait. China urges all parties to remain calm and exercise restraint to resolve the issue.

China has criticized the United States' potential blockade of Iranian ports, deeming it "irresponsible and dangerous." This statement follows US accusations of "economic terrorism" against Iran for disrupting traffic in the Strait of Hormuz. A Chinese foreign ministry spokesman urged all parties to adhere to ceasefire arrangements, prioritize dialogue, and restore normal traffic in the strait. The spokesman also refuted reports that China was preparing to deliver air defense systems to Iran, dismissing them as fabrications. He further stated that China would take countermeasures if the US imposed tariffs based on these accusations. The US had threatened tariffs on Chinese goods if military assistance was provided to Iran.

Russian Foreign Minister Sergey Lavrov met with Chinese President Xi Jinping in Beijing on Wednesday to discuss geopolitical issues, including the conflict in the Middle East and the war in Ukraine. Xi Jinping called for stronger strategic coordination between China and Russia, emphasizing the importance of their relationship amidst international instability. He urged both countries to protect their interests and support Global South unity. Lavrov and Chinese Foreign Minister Wang Yi also discussed the Middle East conflict and the Ukraine war on Tuesday. Lavrov offered that Moscow could compensate for China's energy shortages due to the Strait of Hormuz shutdown.

Despite a newly imposed US blockade on ships calling at Iranian ports, at least three tankers transited the Strait of Hormuz on Tuesday. These vessels were not heading to Iran and therefore not directly affected by the blockade. One tanker, the Panama-flagged Peace Gulf, is transporting Iranian naphtha to the UAE. Two US-sanctioned tankers, Murlikishan and Rich Starry, also passed through the strait. Murlikishan is heading to Iraq to load fuel oil, while Rich Starry, sanctioned for dealing with Iran, exited the Gulf carrying methanol after loading cargo in the UAE. The US blockade was announced after failed peace talks between the US and Iran in Pakistan.

A Chinese tanker, the Rich Starry, retreated twice in 48 hours from the Strait of Hormuz, where a US naval blockade is in effect. The vessel, which is sanctioned by the US and flies the flag of Malawi, initially approached the strait on Monday after departing from the UAE, but turned back shortly before entering. On Tuesday, it entered the Gulf of Oman before making a U-turn and anchoring near Iran's Larak Island by Wednesday evening. The Rich Starry is reportedly carrying approximately 250,000 barrels of methanol acquired in the UAE. Analysts suggest that the incident reflects the risks commercial vessels face due to the blockade, with no ships receiving preferential treatment.

The US-Iran war, initiated by US strikes in late February, has significantly impacted China-US relations. A planned March meeting between Presidents Trump and Xi was postponed and rescheduled for May, but the conflict threatens to overshadow trade discussions. Initially, analysts predicted short-term benefits for China, including higher oil prices hurting the US more and distracting Washington from Asia-Pacific security concerns. However, China now faces potential long-term risks, primarily concerning energy security. Rising pump prices and potential shortages threaten Beijing's long-term planning, undermining China's energy security. The US has accused China of being an unreliable partner for stockpiling oil, while China accuses the US of dangerous behavior and threatens retaliation against tariffs.