Deutsche Bank this week issued a stark warning that Iran's actions to condition tanker passage through the Strait of Hormuz on yuan-denominated payments could accelerate the erosion of the decades-old petrodollar system, pushing global energy trade closer to a future where transactions are priced and settled in yuan.
The Petrodollar System's Historical Foundation
The petrodollar system dates back to 1974, when Saudi Arabia agreed to price its oil exports in U.S. dollars in exchange for American security guarantees. That agreement created sustained global demand for the dollar and cemented it as the world's primary reserve currency. The system has endured even as Saudi Arabia's largest customer shifted from the United States to China—which today buys roughly four times as much oil from the kingdom as America does.
The Strait of Hormuz carries about one-fifth of global oil and gas flows. Since the escalation of the conflict in late February 2026, Iran has threatened vessels supporting what it describes as “aggression against itself.” Multiple media reports confirm Iran has negotiated tanker passage only when transactions are settled in yuan—a policy the Deutsche Bank note flags as a potential turning point.
The Rise of Yuan-Based Energy Flows
China is Iran's largest 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 have been moved by China-linked tankers, with many vessels turning off signals to avoid tracking. Reports indicate discussions with at least eight non-Middle Eastern countries regarding yuan-based oil trade for safe passage.
Deutsche Bank strategist Malika Sachdeva writes the conflict “could be the catalyst for the erosion of petrodollar dominance and the beginning of the petroyuan.” The phrasing is deliberate: the bank does not predict a dollar collapse, but points to gradual yet structurally meaningful erosion if yuan-based energy flows take hold.
Sanctioned Oil Already Trading Outside Dollar Rails
Sanctioned oil from Iran and Russia now totals roughly 13 million barrels per day—close to 14% of global supply—with the bulk of that volume already traded outside dollar rails for years. The Iran conflict is widening that channel. Sachdeva's note identifies several downstream risks: Gulf economies hit by the conflict may reduce dollar holdings; sovereign wealth funds and central banks could move away from the dollar faster if U.S. security guarantees appear weakened; and other producers—including Russia and Venezuela—may 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 modest yuan strengthening in some sessions, though analysts say no structural shift is confirmed yet.
Broader De-dollarization Context
BRICS nations have pushed non-dollar trade agreements. Russia and China had already settled energy contracts in yuan before the current conflict. Central banks worldwide have been increasing gold and non-dollar reserve assets. Iran's situation is accelerating a trend already in motion.
BlackRock CEO Larry Fink warned that oil price spikes related to geopolitical tensions could push the global economy into a severe recession. In contrast, Sachdeva sees the war as a historical stress test for the dollar: “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 continue to watch yuan-priced and settled oil flows through Hormuz as a key indicator.
Whether the conflict subsides before permanent structural damage is done remains an open question. Markets have reflected cautious optimism through Wednesday, though Deutsche Bank's analysis suggests monetary pressure is already being applied.