Iran’s Hormuz pain is China’s yuan gain

 Asia Times   by William Pesek March 24, 2026

Iran is simultaneously strangling global oil supply, accelerating petrodollar’s decline and boosting China’s currency ambitions. 

TOKYO — Say what you want about the Iranian regime, it’s a master troller in ways for which US President Donald Trump surely didn’t foresee.

Nowhere is that more apparent — or potentially impactful — than Iran’s reported plan to showcase the yuan by requiring all oil tankers transiting the Strait of Hormuz to settle transactions in the Chinese currency. It’s enough to ruin Trump’s week — and that’s saying a lot considering the many ways the US-Israeli attack on Iran has gone sideways. Another example: Iran calling Trump’s bluff in supposed ceasefire talks. On Monday, Trump delighted markets by stating he’s postponing his 48-hour ultimatum on attacking Iran’s energy infrastructure amid “productive” negotiations to end the hostilities. Tehran’s response, essentially, was: “Uhhh, what talks?”

But the yuan wrinkle could put Trump World in quite a bind. Assuming Iran would even consider allowing US-bound tankers through the Strait, requiring payment in yuan would be a significant diplomatic concession. Among the reasons Trump was reelected was a pledge to take China down a peg, hence his tariff-fueled trade war. Inadvertently, though, Trump is making the idea of a “petro-yuan” great again. 

Kashif Hasan Khan, economist at Cambodia’s Paragon International University, notes that reports that Tehran may condition tanker passage on yuan-denominated oil trade should be read less as a technical payment proposal than as a geopolitical signal. As he writes in an Asia Times op-ed, “It would represent a deliberate attempt to fuse military geography with monetary strategy.” Khan argues that Iran has at least three incentives for demanding yuan. One, evading sanctions. Two, do China a solid to stay in Xi Jinping’s good graces. Three, challenging the petrodollar order. Of course, the dollar isn’t about to be dethroned overnight, nor is the yuan ready to assume the full burdens of a global reserve currency. Ten years after Xi got serious about yuan internationalization, China’s currency accounts for just 2% of foreign-exchange reserves, compared with 57% for the dollar and roughly 20% for the euro. For all China’s ambitions to replace the dollar, Team Xi has yet to scrap capital controls or let the People’s Bank of China make its own rate decisions. Even though US debt is zooming toward US$40 trillion, chaos in the Middle East has led many investors to choose holding dollars over gold.

The Economist puts it well this week when it argues that “conflict ravaging the Middle East may best be understood as two parallel wars. One is the campaign of American and Israeli air strikes against the Iranian regime; the other is Iran’s war on the global economy.” If Trump fails to address both simultaneously and successfully, says Frederick Kempe, CEO of the Atlantic Council, “he risks turning what has thus far been a tactical military success into a strategic failure with longer-term consequences for international stability.” The first war is one of missiles, drones and Israel’s targeting of Iranian leaders, now entering its fourth week. “That brings us to the second conflict unfolding in shipping lanes, in energy markets and among political leaders,” Kempe notes.