Deutsche Bank has issued a stark warning in a March research note, stating that Iran's move to condition safe passage for oil tankers through the Strait of Hormuz on yuan-denominated payments could accelerate the erosion of the multi-decade petrodollar system and push global energy trade closer to a future where transactions are priced and settled in yuan. The analysis, authored by strategist Malika Sachdeva, paints what she calls a 'perfect storm for the petrodollar' as the ongoing US-Israel-Iran conflict unfolds.
The Petrodollar System and its Current Challenge
The petrodollar mechanism dates back to 1974, when Saudi Arabia agreed to price its oil exports in US dollars in exchange for US security guarantees. This agreement created sustained global demand for the dollar, cementing it as the world's primary reserve currency. However, Deutsche Bank's Sachdeva highlights the Iran conflict as a potential turning point. Since the escalation of hostilities in late February 2026, Iran has threatened vessels supporting what it describes as 'aggression against itself' and has reportedly only allowed tanker passage when transactions are settled in yuan—a policy the bank flags as a potential inflection point.
The Strait of Hormuz handles about one-fifth of global oil and gas flows. Multiple media reports confirm that Iran has negotiated safe passage for oil tankers only when yuan-denominated payments are used. China, Iran's largest oil buyer, has long promoted yuan-based energy billing through mechanisms like the mBridge project. Since late February, at least 11.7 million barrels have been moved via China-linked tankers, with many ships disabling transponders to avoid tracking. Talks have also reportedly taken place with at least eight non-Middle Eastern countries regarding yuan-based oil trade for safe passage.
Deutsche Bank's View: Catalyst for Petroyuan
Sachdeva writes that the conflict 'could be a catalyst for the erosion of petrodollar dominance and the dawn of the petroyuan.' This phrasing is measured: Deutsche Bank does not predict the immediate collapse of dollar dominance, but points to a gradual yet structurally significant erosion if yuan-based energy flows become established. Sanctioned oil from Iran and Russia already totals roughly 13 million barrels per day—nearly 14% of global supply—with the bulk traded outside dollar rails for years. The Iran conflict expands this channel.
The note identifies several downstream risks. Gulf economies harmed by the conflict might reduce their dollar asset holdings. If US security guarantees appear weakened, sovereign wealth funds and central banks could move away from the dollar more rapidly, diversifying reserves. Other producers—including Russia and Venezuela—may also find additional reasons to channel energy sales outside the dollar system. West Texas Intermediate crude has traded above $90 per barrel in recent sessions, reflecting market tension over Hormuz risk. Forex markets have shown mild yuan strengthening in some sessions, though analysts say no structural shift is confirmed yet.
Broader De-dollarization Context
The broader de-dollarization context is important here. BRICS nations have pushed non-dollar trade agreements. Russia and China had settled energy contracts in yuan before the current conflict. Central banks globally have been increasing gold and non-dollar reserve assets. Iran's situation accelerates a trend already underway. The Deutsche Bank note cautiously acknowledges the dollar's resilience, relying on deep liquidity and global network effects—something unlikely to be rapidly undone by a single geopolitical event. Some analysts note that past oil shocks, including the 1970s, ultimately strengthened the dollar rather than weakened it.
However, Sachdeva sees the war as a historical stress test. She writes: 'Iran's long-term legacy for the dollar could be the way it tests the foundations of the petrodollar regime.' The bank is watching oil flows priced and settled in yuan through Hormuz as a key indicator to monitor going forward. Whether the conflict subsides before permanent structural damage is done remains an open question. Markets have reflected cautious optimism through Wednesday, but Deutsche Bank's analysis suggests monetary pressure is already being applied.
BlackRock CEO Warns of Global Recession Risk at $150 Oil
Separately, BlackRock CEO Larry Fink has warned that oil price spikes linked to geopolitical tensions could push the global economy into a severe recession. He cautioned that if Brent crude exceeds $150 per barrel, the global economy faces significant risks. This warning echoes Deutsche Bank's analysis, highlighting the profound implications of the Middle East conflict for global financial markets.