While the yuan’s rise amid the Iran war signals a potential shift in global trade dynamics, the US dollar’s entrenched dominance means any real challenge to the greenback will be gradual, not immediate.
China’s push to internationalise the yuan is once again in focus after the Iran war triggered renewed debate over the dominance of the US dollar, even as the greenback continues to anchor global trade.
Xi Jinping’s petroyuan vision resurfaces
On a 2022 West Asia visit, Chinese President Xi Jinping had revived the idea of a petroyuan as an alternative to the petrodollar system, signalling Beijing’s long-term ambition to challenge US dollar supremacy in energy-linked trade.
The concept, however, had gained limited traction at the time. The latest conflict in Iran has now brought it back into global economic discussions.
Iran war adds momentum to yuan push
The Iran war has given the yuan the kind of momentum China has been waiting for over several years. While the US dollar still dominates international transactions, reports suggest the Chinese currency has seen a noticeable uptick in demand during the conflict period.
Market observers say the war has revived broader discussions around de-dollarisation, with renewed attention on alternative settlement currencies in energy trade.
Strait of Hormuz payments shift raises symbolic change
A key development began when Iran reportedly took greater control over the Strait of Hormuz and agreed to accept payments in Chinese currency, allowing commercial freighters to pass safely through the strategic waterway.
The arrangement is being viewed as a symbolic shift in energy-linked trade settlements, particularly in the oil and shipping ecosystem that has traditionally relied on dollar-denominated transactions.
Yuan strengthens against dollar, hits 3-year high
Market indicators also reflect the shift in sentiment. The yuan has surged 2.3 per cent against the US dollar since February 28, when the Iran war began, according to data cited in reports.
The currency also touched its strongest level in three years against the dollar, marking its firmest position since March 2023.
Dollar dominance intact despite shifting sentiment
Despite these gains, economists caution that the US dollar remains deeply entrenched in global trade and financial systems.
However, the recent movements underline how geopolitical shocks are increasingly being leveraged by China to expand the yuan’s international footprint, even if structural dominance remains unchanged for now.
First Published:
April 14, 2026, 17:03 IST
Naijaonpoint
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