Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
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The headline coverage of the Iran war would have investors believe that elevated oil prices and rising living costs are the only economic consequences. In reality, this increasingly volatile conflict is testing one of the most important pillars of the global financial system: the U.S. dollar’s dominant position.
Inadvertently, U.S. military action against Iran has contributed to tighter control over global oil flows, the expansion of yuan-based energy transactions, and growing skepticism among Gulf nations about the reliability of the U.S. security umbrella. Together, these developments are placing new pressure on the petrodollar system that has long supported the dollar’s leading role in global trade.
The Dollar Spike Hides Structural Vulnerability
The dollar has been falling steadily since early 2025, when the U.S. Dollar Index (DXY) hit a recent peak near 110. After falling to a year-to-date low of 95, this key metric of the dollar’s relative strength against other currencies has seen renewed momentum. The outbreak of the conflict in Iran has acted as a tailwind, spiking the DXY over 100. However, this 5% surge in the dollar’s value paints a grossly incomplete picture of the war’s impact on the greenback.
Instead of reinforcing the dollar’s status as the world reserve currency, this temporary dollar strength more accurately reflects the immediate impact of an energy crisis. The USD’s reputation may be slowly waning, but it still represents the safest alternative in the midst of full-blown war. Additionally, with most of the oil trade denominated in dollars and prices exploding, countries are forced to load up on the dollar to shore up their energy demands.
A Key Oil Route Becomes Currency Leverage
The Trump administration entered the war with a multipronged set of objectives, but Iran’s de facto control over the strategically critical Strait of Hormuz has quickly shifted attention to this 21-mile-wide chokepoint. Roughly 20% of the world’s oil supply moves through this narrow passage, but around 60% of Middle Eastern exports are directed toward Asia.
The Petrodollar: A Retrospective
How To Prepare For The Impending Dollar Failure
Get Report – It’s Free!Rather than shutting down the waterway entirely, Iran has taken a more calculated approach. It is selectively allowing ships to pass, often based on their country of origin and final destination. Multiple reports indicate that, in some cases, access has been made conditional on payments in Chinese yuan. This is perhaps the most impactful development in the decades-long battle between the petrodollar and the petroyuan.
An Existential Threat to the Petrodollar System
A key pillar of the dollar’s global hegemony is the petrodollar system: an unofficial agreement between the U.S. and the Gulf nations, which traded security guarantees for oil priced in USD. Since the 1970s, this mutually beneficial structure has helped build and reinforce the dollar’s central position in worldwide trade, foreign exchange reserves, and international financial markets.
America benefited from central banks holding large quantities of dollars, which were eventually reinvested into U.S. Treasuries, creating a positive feedback loop known as petrodollar recycling. This steady demand for federal government securities is a vital source of funding for the country’s exorbitant national debt, which recently hit $39 trillion.
The Shift Toward a Multipolar Currency System
Iran’s decision to force oil purchases in yuan is the largest boon the Chinese currency has had in its long-standing fight to topple the dollar’s leading position. While currently limited in scale, these transactions mark one of the most official and significant affronts to the 50+ year petrodollar norm, loosening the dollar’s grip on the global financial system. Simultaneously, American investors are losing all the advantages associated with a dominant dollar.
Instead of clearing a path for the yuan to become the world’s reserve currency, experts see the ushering in of a multi-polar currency environment. To be sure, this development still poses grave risks to the U.S. dollar. Since Russia moved portions of its trade outside dollar channels following sanctions tied to its invasion of Ukraine, de-dollarization efforts have picked up steam. Iran’s strategic move to shift oil trade in yuan is, at once, a blow to the petrodollar and a handout to the petroyuan.
Gold’s Role Becomes Clearer
Beyond oil prices and inflation, the deeper conversation surrounding the Iran War’s fragmentation of the USD-led global economy isn’t complete without considering the impact of safe-haven assets. With countries actively divesting from the dollar and no currency, not even the yuan, strong enough to replace it immediately, neutral assets are receiving more attention.
The flipside of central banks shedding their USD reserves and U.S. Treasuries has been a steady pace of gold accumulation. This broader shift is reflected in overall demand. According to the World Gold Council, total gold demand surpassed 5,000 metric tonnes in 2025 for the first time on record
Unlike fiat currencies, which are heavily tied to domestic fiscal policies, energy security, and geopolitical fluctuations, gold is completely untethered, with a strong tendency to keep pace with inflation and even rise during economic downturns.
When the global financial system resets, where will your savings be?
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