Deutsche Bank this week issued a stark warning that Iran’s condition for allowing oil tankers to pass through the Strait of Hormuz—requiring settlement in Chinese yuan—could accelerate the erosion of the decades-old petrodollar system and bring global energy trade closer to a future priced and settled in yuan. The research note, authored by strategist Malikha Sachdeva, calls the ongoing U.S.-Israel-Iran conflict a “perfect storm for the petrodollar.”
The Petrodollar System Under Stress
The petrodollar mechanism dates back to 1974, when Saudi Arabia agreed to price its oil exports in U.S. dollars in exchange for American security guarantees. That deal created sustained global demand for the dollar and cemented its status as the world’s primary reserve currency. The system persisted even as China became Saudi Arabia’s largest customer—today, the kingdom sells roughly four times more oil to China than to the United States. However, Iran’s latest move is testing its foundations.
The Strait of Hormuz carries about one-fifth of global oil and gas flows. Since the conflict escalated in late February 2026, Iran has threatened to intercept vessels supporting what it calls “aggression against itself.” Multiple media reports confirm that Iran has only negotiated or allowed tanker passage when transactions are settled in yuan—a policy the Deutsche Bank note flags as a potential turning point.
Rise of Petroyuan Flows
China is Iran’s top oil buyer and has long promoted yuan-based energy invoicing through mechanisms like the mBridge project. Since late February, at least 11.7 million barrels of oil have been moved via China-linked tankers, with many ships turning off transponders to evade tracking. Additionally, at least eight non-Middle Eastern countries have reportedly held talks on yuan-based oil trade for safe passage.
Sachdeva writes, “This conflict could be the catalyst for the erosion of petrodollar dominance and the beginning of the petroyuan.” She is careful to note that Deutsche Bank does not predict an immediate collapse of the dollar, but points to a gradual yet structurally significant erosion if yuan-based energy flows become entrenched.
The Scale of Non-Dollar Oil Trade
Sanctioned oil from Iran and Russia already totals roughly 13 million barrels per day—nearly 14% of global supply—and a substantial portion has been traded outside dollar rails for years. The Iran conflict expands this channel.
The report identifies several downstream risks. Gulf economies damaged by the conflict may reduce their dollar-denominated assets. If U.S. security guarantees appear weakened in the region, sovereign wealth funds and central banks could accelerate diversification away from the dollar. Other producers—including Russia and Venezuela—may also find more reasons to steer 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. Currency markets have shown mild yuan strengthening in some sessions, though analysts say no structural shift is confirmed yet.
Broader De-Dollarization Context
BRICS nations have advanced non-dollar trade agreements. Russia and China had already 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 an already ongoing trend.
Nevertheless, Deutsche Bank cautiously notes the dollar’s resilience relies on deep liquidity and global network effects—something unlikely to be quickly unraveled by a single geopolitical event. Some analysts recall that past oil shocks, including the 1970s, ultimately strengthened the dollar rather than weakening it.
Meanwhile, BlackRock CEO Larry Fink warned that oil prices spiking to $150 per barrel due to geopolitical tensions could push the global economy into a severe recession. He compared the situation to historical crises.
Sachdeva concludes, “The long-term legacy of the Iran conflict for the dollar may be the way it tests the foundations of the petrodollar regime.” The bank will monitor yuan-priced and settled oil flows through Hormuz as a key indicator going forward.
Whether the conflict subsides before permanent structural damage is done remains an open question. Markets have reflected cautious optimism into Wednesday, but Deutsche Bank’s analysis suggests monetary pressure is already being applied.