For one, the Iranians have gained near-total control of the Strait of Hormuz, through which roughly 20% of the world’s oil and gas passes. Kelly Magsamen, senior advisor at The Asia Group and the former chief of staff to the Secretary of Defense from 2021 to 2024, told reporters on June 30 that the ceasefire is functioning more like a stopwatch and that volatility and unpredictability are going to be the state of play for the Strait of Hormuz moving forward.
“It’s very clear to me that the Iranians are using this period of de-escalation to try to increase and continue their leverage over the Strait of Hormuz,” she adds. “What’s interesting to me is that while the MOU may have been agreed, the implementation is really being shaped on the battlefield and in the Strait.”
That would explain why both sides are still volleying missiles at one another despite signing the MOU. After launching multiple strikes at each another, Trump announced in a Truth Social post on July 10 that the ceasefire between the US and Iran was “in no uncertain terms” over, though both countries will continue to engage in peace talks. Then, on July 13, Trump said he was reinstating the US naval blockade on Iran. Trump initially said the US would be charging a 20% fee on ships passing through the Strait of Hormuz before dropping the idea just a day later. The fee, he says, would instead be replaced by investments made by the Gulf states into the US.
“Both sides are trying to ensure that they maintain leverage in the context of the negotiations,” Magsamen says. “Going forward, if Iran begins to feel, in real terms, the economic benefits of the agreement, whether it’s through the asset release or the oil waivers, etc, when that starts to actually hit their pockets, I think maybe some of this recedes into the background as the Iranians start to get more of the benefits.”
See also: Expect a period of ‘choppy rotation’ in equities: Schroders
The Asia Group was founded in 2013 by former diplomat Kurt Campbell, who served in both the Barack Obama and Joe Biden administrations. Most recently, Campbell was President Biden’s national security coordinator for the Indo-Pacific from 2021 to 2024 and his deputy secretary of state from 2024 to 2025. He rejoined the strategic advisory firm on Feb 25, 2025, as its chairman.
On June 29, The Asia Group released a report assessing the impact of the closure of the Strait of Hormuz on Asia. Titled “No Safe Harbor: Asia’s Continued Exposure to the Strait of Hormuz”, the report identified China as a clear winner from the crisis, “thanks to its large oil and gas reserves and diversified energy supply.” Magsamen and her colleagues discussed the report’s findings during a media briefing on June 30.
China is resilient, but not immune
Most analysts were bullish on China’s prospects heading into the war with Iran. Bank of Singapore’s chief investment strategist Eli Lee told clients in a note on March 12 that he was still overweight on China equities. For Lee, China’s diversified energy supply gives it a “structural hedge” against fluctuations in oil and gas prices. That was the same assessment given by Han Lin, China country director for The Asia Group.
“The conventional wisdom is that the Hormuz disruption should have hurt China more than anyone else, because it is the world’s largest energy importer, but unlike many other Asian nations, it turns out the crisis is really more of a strategic warning than an economic shock for China,” Han says.
That said, Han did caution against seeing China’s triumph as a form of invulnerability against geopolitical shocks. The timing of the crisis was a major factor in China’s outperformance, says Han, who was previously the deputy general manager at Wells Fargo Bank in China.
“China is more resilient than vulnerable, but resilience isn’t immunity. We are seeing Beijing entering this crisis with significant advantages, such as strategic petroleum reserves, diversified energy suppliers and strong state intervention tools, but the bigger risk isn’t China’s energy security; it’s global demand.
“Even if China can weather higher oil prices, if Europe, Southeast Asia, and other major markets slow down, that becomes China’s real vulnerability,” Han adds. “Hormuz exposes China’s strategic dilemma: can they remain an economic superpower without taking a greater responsibility for global security? That’s a tough decision. It doesn’t look like they want to do so, but China is determined to build an economy that no single choke point can hold hostage.”
India’s not out of the woods
India, on the other hand, had a much tougher time navigating the oil shock. That was largely due to its status as one of the largest net importers of crude oil. India is heavily reliant on imports to meet its energy needs, with its domestic oil production accounting for only 13% of its supply. As a result, some restaurants and hotels in India had to cease operations entirely due to the acute shortage of oil and gas.
For more stories about where money flows, click here for Capital Section
“India has done a great job of managing the initial shock, but at a cost,” says Nisha Biswal, a partner at The Asia Group. “The government has a very credible toolkit of fuel subsidies, tax adjustments, price controls, welfare support, foreign exchange interventions, as well as very active supply diversification.”
While such measures have been useful in blunting the immediate impact of the oil shock, Nisha argues that it will become harder for India’s government to maintain these measures as the crisis drags on. “The fiscal cost of these measures will rise, and that creates additional impacts on the Indian economy, as well as on budget priorities,” says Nisha, who was previously assistant secretary of state for South and Central Asian affairs from 2013 to 2017 during the Obama administration.
Furthermore, the impact of the oil shock on companies has been uneven. Larger firms have been better positioned to absorb the shock, while small- and medium-sized enterprises have been harder hit due to tighter margins and working capital constraints.
“The key risk for India is the duration of the crisis, which would narrow the policy space and accelerate India’s move towards diversification away from Hormuz,” Nisha says.
“India can manage the short disruption and has done so quite well, but a crisis extending into late 2026 would really force harder trade-offs on inflation control, fiscal discipline, and growth support.”
Trump deserves credit
One thing that has puzzled market watchers is just how quickly oil prices have fallen following the announcement of the MOU between the US and Iran. On July 1, Brent crude prices fell to about US$71 per barrel, reaching their lowest levels since March, when the war had just begun.
Campbell says the rapid fall in prices can be attributed to the Trump administration’s messaging on the war as well as the market’s overall mood. “You have to hand it to President Trump and the administration. They had been masterful in how they engaged markets, and this sense of optimism, not just in oil futures but across many sectors, is apparent.”
The timing of the crisis has been critical in containing the fallout from the energy crisis, Magsamen says. Some countries, especially China, had significant stockpiles to weather the crisis. “We are now at a different stage, heading into winter, so this picture may shift over time if this disruption continues.”
In fact, China might have played a crucial role in helping stabilise global markets during the oil shock, says Han. “China cut its crude imports significantly, from roughly 12 million barrels per day to about 8 million, so that was probably the largest demand adjustment anywhere in the global energy system.”
“That type of demand destruction almost absorbed much of the global supply shock, so that helped to prevent an even larger oil spike than a lot of analysts expected,” Han adds. “China was both the biggest victim of the disruption going on, but paradoxically one of the reasons why global markets helped to stabilise.”
Strait of Hormuz won’t be the same again
Even though Iran has agreed to allow ships to pass through the Strait of Hormuz toll-free during the 60-day negotiating period, Campbell says it is almost unquestionable that the Iranians will impose some form of a fee on ships thereafter. “My sense is that Iran’s position here is going to be quite firm.”
“There will be new shipping routes that will be closer to its borders that Iran will insist upon,” Campbell says. “They’re going to want to exert control over who comes and goes, and I fully expect them to seek payment.”
The fact that Trump is in dire need of a deal before the US midterm elections in November is not lost on the Iranians either. “Iran can sense that the Trump administration is quite anxious to strike a deal, and for those of us who had to sit down or have been in situations with Iranian diplomats, they are very skilled, but extraordinarily patient, and can glean quite clearly when they’re sitting down with someone who wants a deal more than they do.”
