Iran War Paves Way for “PetroYuan”.. Erosion of Dollar Dominance, Says DB

The economic fallout from the war on Iran may mark the beginning of the end for the petrodollar’s global dominance, according to foreign exchange analyst Malika Sachdeva at Deutsche Bank.

Sachdeva highlighted that the conflict could pave the way for the “petroyuan” as a potential alternative, citing a report by CNBC.

In a research note, Sachdeva stated that while the U.S. dollar remains the world’s primary reserve currency, with most oil priced in dollars, the ongoing conflict could erode its dominance if some countries begin pricing oil in alternative currencies. She suggested the war may later be seen as a key factor in “the decline of the petrodollar and the emergence of the petroyuan.”

Since 1974, the United States and Saudi Arabia agreed to price oil exports in dollars and invest surplus revenues in U.S. Treasury bonds in exchange for security guarantees. However, attacks on U.S. bases, oil fields, and Gulf infrastructure have tested this arrangement, potentially prompting some Gulf economies to reconsider their dollar reserves.

The research note referenced reports that Iran is negotiating with countries to allow ships through the Strait of Hormuz if oil is purchased with yuan. While this remains speculative, Deutsche Bank notes the strategic importance of the Middle East for the dollar’s role as a reserve currency cannot be understated.

Sachdeva also highlighted that growing investment in renewable energy could reduce future demand for fossil fuels, adding: “A world more self-sufficient in defense and energy will also be a world holding fewer dollar reserves.”

The report signals a potential shift in global energy finance, suggesting that geopolitical conflicts combined with technological and energy transitions could gradually reshape the structure of international reserves.