Iran’s Strait of Hormuz Leverage: Is the Petrodollar System Cracking?

Analysis and summary based on the article « The Iran War Is Exposing the Petrodollar While Boosting the Yuan » by Eric Sepanek

The conflict involving Iran is challenging the U.S. dollar’s dominance in the global financial system, despite an initial spike in the dollar’s value (DXY) following the outbreak of war, which primarily reflects immediate energy crisis dynamics rather than reinforced reserve currency status.

While the dollar benefits temporarily as a safe haven amid volatility and because most oil is still dollar-denominated, underlying structural vulnerabilities are being exposed. Iran’s strategic control over the Strait of Hormuz, a critical chokepoint for about 20% of global oil supply, has become a source of currency leverage.

Iran is reportedly allowing passage selectively, sometimes making traffic conditional on payments in Chinese yuan. This represents a significant challenge to the decades-old petrodollar system—the informal agreement exchanging U.S. security guarantees for Gulf oil priced in USD, which has long supported the dollar’s role and facilitated the recycling of dollars into U.S. debt.

The selective acceptance of the yuan for oil trade provides a major boost to the petroyuan, signaling a move away from the 50-year petrodollar norm and loosening the dollar’s global grip. Although this is unlikely to lead immediately to the yuan becoming the sole reserve currency, experts suggest it points toward a multipolar currency environment.

This de-dollarization trend has also been fueled by actions like Russia moving trade outside dollar channels following sanctions. As central banks divest from the dollar and Treasuries, interest is growing in neutral, safe-haven assets, most notably gold. Gold demand surpassed 5,000 metric tonnes in 2025, reflecting a search for assets untethered from domestic fiscal policies and geopolitical risks, unlike fiat currencies.