WHILE missiles sailing over the Persian Gulf, one way or the other, are making the headlines, the real explosions are being heard in the financial markets around the world. For the first time in nearly a century, the United States dollar (USD) is no longer the master player. In the midst of the conflict, the world’s most dangerous chokepoint has adopted a new currency: the Chinese Yuan (CNY). Forget the traditional blockade. Iran has not just closed the door to the Strait of Hormuz; it has changed the lock. The petrodollar is dying in the heat of the desert, and in its place, the CNY is rising. The US dollar, the aging heavyweight champion of global trade, is being forced to abdicate the throne.

The Strait of Hormuz has always been referred to as the jugular vein of the world economy in the sense that a quarter of the world’s oil passes through it. Previously, it was quite a simple threat in case of a war: Iran would close the Strait, and the world would run out of energy. However, the strategy has changed in 2026. Tehran has not merely closed the door; it has installed a currency-coded lock.

The Islamic Revolutionary Guard Corps (IRGC) has adopted the policy of selective navigation. While Western-flagged tankers and ships transacting in US dollars face seizure or drone strikes, a Green Corridor has been established for vessels that can demonstrate that their cargo has been settled through the China Cross-Border Interbank Payment System (CIPS) using CNY. This change is the realisation of the 25-Year Strategic Cooperation Agreement between Beijing and Tehran, signed in 2021.

In recent decades, the US has used the SWIFT messaging system as a financial guillotine to cut off the so-called ‘rogue states’ from the global economy. Today, any ship attempting to use SWIFT can be immediately identified as a ‘hostile economic entity’ by the Iranian coastal batteries. Transactions in Yuan, however, occur within a ‘black box’ that the US cannot easily track or sanction without having to directly attack the Chinese Central Bank, which is a move that would have severe consequences.

Since the 1970s, the petrodollar system, whereby oil is sold exclusively in USD in exchange for American security guaran-tees, has enabled the US to run massive deficits without facing consequences. The recent war has shattered that pact. The Gulf Cooperation Council (GCC) states, especially Saudi Arabia and the United Arab Emirates, have watched with increasing concern as US strikes fail to eliminate Iranian missile capabilities. With the security guarantee weakening, Saudi Arabia has reportedly been having second thoughts.

For the average American, the CNY supremacy in the Strait of Hormuz is not going to be just a distant geopolitical theory. As the dollar loses its role as the sole oil currency, its value will only plummet. We are witnessing the first signs of hyperinflation in the West, while Beijing enjoys a period of relative price stability after having secured its energy needs at a discounted ‘war rate’ from Tehran.

There is a certain irony in the current situation. The US and Israel are winning the tactical battles, destroying Iranian radar sites and decapitating leadership, but they are losing the structural war.

Abdul Rehman
Sukkur

Published in Dawn, March 30th, 2026