Deutsche Bank issued a research note this week warning that Iran’s demand for yuan-denominated settlement for oil tanker passage through the Strait of Hormuz could accelerate the long-term erosion of the petrodollar system, pushing global energy trade toward yuan pricing and settlement. The note, authored by strategist Malika Sachdeva, framed the ongoing US-Israel-Iran conflict as a “perfect storm for the petrodollar.”
Historical Context and Emerging Threats to the Petrodollar
The petrodollar system dates back to 1974, when Saudi Arabia agreed to price its oil exports in US dollars in exchange for American security guarantees. This deal created sustained global demand for the dollar and cemented it as the world’s primary reserve currency. However, the system has been under strain as China became the largest oil importer. Deutsche Bank’s analysis highlights the Strait of Hormuz, which carries about one-fifth of global oil and gas flows. Since late February 2026, Iran has threatened vessels supporting what it calls “aggression against itself,” and multiple media reports confirm that Iran is only negotiating safe passage when transactions are settled in yuan—a policy the Deutsche Bank note flags as a potential inflection point.
Petroyuan Flows in Practice
China, as Iran’s largest oil buyer, 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 via China-linked tankers, with many vessels turning off signals to avoid tracking. Reports indicate at least eight non-Middle Eastern countries have held talks on yuan-based oil trade for safe passage. Sachdeva writes: “This conflict could serve as a catalyst for the erosion of petrodollar dominance and the beginning of petroyuan.” While Deutsche Bank does not predict an immediate dollar collapse, it warns that if yuan-denominated energy flows become entrenched, a gradual but structurally significant erosion of dollar hegemony will follow.
Sanctioned Oil Already Circulating Outside Dollar System
Combined sanctioned oil from Iran and Russia already totals about 13 million barrels per day—nearly 14% of global supply—with the bulk traded outside dollar rails for years. The Iran conflict is now expanding this channel. Sachdeva identifies several tail risks: Gulf economies hurt by the conflict may reduce dollar assets; if US security guarantees appear weakened, sovereign wealth funds and central banks could diversify reserves more quickly; 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. Forex markets have shown mild yuan strengthening on some days, though analysts say no structural shift is confirmed yet.
BlackRock CEO Warns of Global Recession Risk if Oil Hits $150
Echoing the Deutsche Bank report, BlackRock CEO Larry Fink warned that a surge in oil prices linked to geopolitical tensions could drive the global economy into a severe recession. He drew comparisons to past oil crises, stating that if oil reaches $150 per barrel, the global economy would suffer heavily. This warning amplifies market concerns about energy security and monetary system stability.
Nevertheless, Sachdeva views the conflict as a historical stress test. She writes: “The long-term legacy of the Iran conflict for the dollar could be the way it tests the foundations of the petrodollar regime.” Deutsche Bank will track oil flows priced and settled in yuan 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 through Wednesday, but the Deutsche Bank analysis suggests monetary pressure is already being applied.