Is China the big winner of the US-Iran conflict? Seen from the prism of a 21st century cold war, plausibly

—Wooden Ships by Crosby, Stills, Nash and Young

It is now relatively quiet on the West Asian front and there is little doubt that we have moved away from the brinkmanship of 7 April, a critical turning point.

On that day, US President Donald Trump threatened a civilizational war against Iran, which responded by mobilizing human shields to protect critical infrastructure and suspending truce talks with the US.

In that moment, the price of Brent crude oil for physical delivery briefly surged to $144 per barrel and headlines warned of ‘Armageddon.’ This marked the peak of global panic.

Yet, just two days later, the hot war was effectively over. Markets reacted swiftly: Brent crude fell to $96 by 10 April, though it reached $105 this week after US-Iran talks fell apart. Both adversaries are still blowing hot and cold, but we are unlikely to see another 7 April-like panic so long as today’s uneasy truce holds. However, what we have witnessed is not merely the end of a potential global conflagration, but possibly the emergence of a new kind of Cold War.

To understand this shift, we must ask who has actually won. Certainly not Trump. His Republican Party appears to be headed for electoral losses in November, while NBC and Reuters polls place Trump’s approval rating at around 40%, just slightly higher than Joe Biden’s before he lost the presidency.

Nor is Iran the winner. Despite fighting a remarkable ‘David versus Goliath’ battle, it has been left with a severely degraded military and battered civilian infrastructure, requiring billions of dollars to rebuild.

Israel cannot be considered a winner either. It finds itself reluctantly drawn into negotiations, even though its primary concern has always been Iran itself.

The clearest winner is China. In an earlier Mint article (24 April 2025), I argued that the ideological Cold War between the US and Russia has ended, giving way to a new era defined by geo-economics.

This becomes clearer when we compare this century’s two most recent major conflicts. The Ukraine war has lasted over four years. By contrast, the US-Iran armed conflict lasted just over a month.

The Ukraine war initially drove up the prices of oil (Russia being a major producer) and grain (with Ukraine a key exporter), but the economic fallout was quickly contained: US policies let Russian oil be exported at capped prices, while grain exports continued. So, while the Ukraine war drags on, the US-Iran conflict has converged on a battle for control over the Strait of Hormuz.

The 20th century Cold War involved visible trade-offs between politics and economics. For example, in 1971, Pakistan attempted to leverage its position to bridge relations between the US and China but failed to prevent the separation of East Pakistan.

At the time, India—though without US support—represented a powerful democratic ideal that Washington could not afford to antagonize beyond a point.

While the global economy was largely insulated from the Ukraine conflict, this is not so of the West Asian crisis. Iran’s use of the Strait of Hormuz as a strategic weapon threatens a vital trade route. Roughly 95% of global trade depends on maritime routes and any disruption can have severe economic consequences.

Despite being one of the world’s largest oil producers, market dynamics pushed up US fuel prices too . The resulting US inflation—which has exceeded 3%—placed significant pressure on the Trump administration. Simply put, American consumers do not tolerate wars that directly affect their wallets.

But how did China emerge as the winner?

It would be naïve to assume that Pakistan has been acting as the principal negotiator. More plausibly, it is functioning as a proxy for both the US and China—two powers unwilling to engage in direct negotiations as the domestic political fallout of a failure would be catastrophic to both.

The extension of peace efforts to Lebanon, despite initial resistance from Israel (and even the US), also bears a clear Chinese imprint. To attribute these developments solely to Pakistan’s mediation would be an oversimplification.

As a fragile peace takes hold and if a modus vivendi can be worked out over Hormuz, the next phase will involve the reconstruction of Iran and other war-hit parts of the Gulf. Here, China is poised to play a role similar to that of America’s in Europe after World War II.

For China, whose economy has been experiencing relative stagnation, this presents an opportunity for renewed growth—even if modest.

At the same time, both Europe and the Gulf states are likely to increase military spending in response to shifting geopolitical realities, which could be of benefit to the defence industries of both China and the US.

Ultimately, the ideological standoff between Israel and Iran may hold limited relevance for the global economy. As both Iran and the US have learnt since their war began on 28 February, the deep economic interdependence of nations ensures that regional conflicts are swiftly curtailed when they threaten global economic stability.

The previous century’s Cold War is long over. What has replaced it is colder, more pragmatic and less sentimental. Economics now dictates strategy—and in this domain, China holds a distinct advantage.

The author is a visiting professor, Shiv Nadar University.