Iran pushes yuan oil payments amid Hormuz crisis, challenging dollar dominance

Three weeks into its battle with the United States and Israel, Iran is exploring a scheme that might change the way the world pays for oil by requesting Chinese yuan in exchange for permitting tankers to cross the Strait of Hormuz.

Approximately 80% of international oil transactions have been conducted in US dollars for the past 50 years or so. Tehran’s action, according to analysts, is intended to circumvent US sanctions, weaken the dollar’s hold on global trade, and draw China more into the fight.

The so-called “petrodollar” has never faced a direct threat quite like this, despite Beijing’s long-standing demand for increased use of its currency in energy markets.

Oil keeps flowing despite the blockade

After the US and Israel launched coordinated air strikes on February 28, hitting military sites and nuclear facilities, the strait ground to a near halt.

The fallout in oil markets was quick and steep. Brent crude jumped past $100 a barrel for the first time since August 2022, touching $126 at its highest point.

To calm things down, 32 countries agreed to release 400 million barrels from emergency reserves, the biggest such release since the IEA was founded 50 years ago.

Despite the blockade, Iranian oil has kept moving. Tracking firm Kpler estimated Iran shipped 12 million barrels since the conflict started, while TankerTrackers.com put the number at 13.7 million barrels. That works out to roughly 1 million barrels per day, most of it headed to China.

Before the conflict, Iran was exporting about 1.69 million barrels a day. Tehran seems to be exerting pressure on Asian buyers by controlling the Strait.

In the words of Iranian Foreign Minister Abbas Araghchi, “The Strait of Hormuz is open; it is only closed to the tankers and ships belonging to our enemies… Others are free to pass.”

On the ground, that selective access is already apparent. After releasing three Iranian tankers it had captured the month before, India managed to get two ships through.

Turkey verified that one of its ships was given permission to pass through. Bulk carriers flying the Chinese flag have also apparently made it through after publicly disclosing their ownership.

Dollar at risk, analysts warn

Financial analysts are watching the yuan proposal closely. Ponmudi R, CEO at Enrich Money, said walking away from the dollar system would create serious uncertainty across currencies, bonds, and stock markets.

Gold and silver, on the other hand, could see gains as investors look for safer ground.

“Any shift from the US dollar to Chinese yuan in the oil trade is expected to put pressure on the US dollar in the currency market. In the wake of a sharp fall in the US dollar, inflation is expected to shoot up in a very short time, a situation that may force the US Fed to raise interest rates, leading to a liquidity crisis in the US economy,” Anuj Gupta, a SEBI-registered market expert, said.

Back in the United States, the timing adds political pressure. Mid-term elections are set for November, and any spike in inflation tied to higher oil prices or a weaker dollar could hurt the Republican Party.

Amit Goel, Chief Global Strategist at PACE 360, said Iran is essentially trying to destabilize the US presidency “without using a single piece of ammunition” by going after the dollar.

In Beijing, though, there is measured caution. Checking whether cargoes are actually priced in yuan through tangled shipping networks is technically difficult.

There is also concern that moving too fast could damage China’s already fragile relationship with Washington.

In its March 2026 report, the IEA pointed out that the eventual reopening of the strait and the currency that oil passes through might change the balance of power in the world economy for years to come.

There’s a middle ground between leaving money in the bank and rolling the dice in crypto. Start with this free video on decentralized finance.