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As US-Iran tensions rise, Tehran may allow oil transactions through Strait of Hormuz in Chinese yuan, challenging the US dollar’s dominance
According to reports, Iran may allow oil tankers to pass through the Strait of Hormuz, provided they trade in the Chinese currency Yuan
US–Iran war: As tensions in the Middle East enter their third week, the conflict between the United States and Iran shows little sign of easing. Instead, hostilities have intensified following reported US military strikes on Iran’s key oil hub, Kharg Island. Tehran is now considering multiple retaliatory options against the US and Israel, including a potential move that could challenge the dominance of the US dollar in global oil trade.
According to a Times of India report citing CNN, Iran is considering allowing oil tankers to pass through the Strait of Hormuz only if oil transactions are settled in Chinese yuan instead of US dollars. Market experts say such a move toward a “petro-yuan” framework could trigger significant volatility across global financial markets.
Why Iran’s Petro-Yuan Plan Matters for Global Markets
Ponmudi R, CEO of Enrich Money, said any shift in oil payments through the Strait of Hormuz from the US dollar to the Chinese yuan could unsettle financial markets in the short term.
For decades, global energy trade has largely been settled in US dollars under the petrodollar system. Any attempt to move away from this structure introduces uncertainty across currencies, bonds and equity markets.
“In the near term, equity markets are likely to remain highly sensitive to geopolitical developments rather than economic fundamentals,” Ponmudi R said. He added that the United States has historically defended the dollar’s central role in global energy trade and is unlikely to accept a rapid shift toward alternative settlement currencies.
Because of this, the issue goes beyond finance and touches on geopolitical power, trade alliances and global monetary influence, he noted.
Safe-Haven Assets May Gain From Currency Uncertainty
Experts believe precious metals could benefit if uncertainty around global currency systems intensifies.
Anuj Gupta, a SEBI-registered market expert, said a transition from the petrodollar to a petro-yuan system could weaken the US dollar and trigger strong safe-haven demand for gold and silver.
“A shift from the US dollar to the Chinese yuan in oil trade could put pressure on the dollar in currency markets,” Gupta said. “If the dollar weakens sharply, inflation risks in the US may rise, which could force the Federal Reserve to raise interest rates and tighten liquidity.”
Ponmudi R also noted that gold and silver typically gain during periods of currency instability or uncertainty in the global monetary system.
However, he added that the dominance of the dollar in global reserves and financial markets means any transition toward a multi-currency global trade system would likely be gradual rather than immediate.
Political Implications in the United States
The proposed move could also carry political implications for the United States.
Amit Goel, Chief Global Strategist at PACE 360, pointed out that the US mid-term elections are scheduled for November this year. A spike in inflation driven by currency weakness or rising oil prices could negatively affect the electoral prospects of the Republican Party led by Donald Trump.
According to Goel, Tehran may be attempting to exert economic pressure on Washington by targeting the petrodollar system, rather than relying solely on military escalation.
The BRICS Factor
Another key element in this evolving situation is Iran’s membership in BRICS, the bloc of emerging economies that has increasingly discussed alternatives to the US-dominated financial system.
“Iran is now a permanent member of BRICS and is part of broader efforts among emerging economies to challenge the US-led petrodollar framework,” Goel said.
He added that any attempt by Iran to promote oil trading in yuan could receive support from countries such as Russia and Brazil, while China would strongly back such a move, as it would strengthen Beijing’s influence in global energy trade.
What Comes Next?
While the idea of settling oil trades in yuan could disrupt markets in the short term, analysts say a structural shift away from the US dollar would require coordination among major oil producers, consuming nations and global financial institutions.
Without such coordination, unilateral moves toward alternative currencies could create instability in trade settlements, shipping insurance and global clearing systems, experts cautioned.
For now, markets remain on edge as investors watch whether geopolitical tensions escalate further and whether Iran seriously pursues the petro-yuan strategy.
March 16, 2026, 08:11 IST
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