The conventional narrative around the Iran war and global finance is by now familiar: the conflict is accelerating de-dollarisation, strengthening China’s petroyuan, and hastening the end of American financial dominance. That narrative is not wrong. But it misses the more consequential shift.

The real story is not replacement, but degradation — the slow weakening of the dollar’s authority without any viable alternative to take its place. A system that is increasingly distrusted, selectively bypassed, yet still unavoidable, is more unstable than one defined either by clear dominance or by orderly transition.

A natural objection follows. If American power is declining, its arsenals draining, its allies hedging, its credibility under strain, then something must be replacing it. And if nothing can replace the dollar, how can that decline be real? The contradiction dissolves once we distinguish between two forms of power that erode at different speeds: military-political influence and monetary-financial dominance.

American military primacy is declining in relative terms. It is stretched across multiple theatres, its resources finite, its adversaries probing its limits, and its allies quietly recalibrating their dependence. That argument holds. But monetary power is structurally more resilient. It rests not on battlefield success but on network effects, institutional depth, legal infrastructure, and, most critically, the absence of credible alternatives.

History offers a clear parallel. Britain’s geopolitical decline began after the First World War, yet sterling remained a major reserve currency well into the 1950s. Empires recede faster than currencies. The delay is not incidental; it is structural.

This delay produces the most........

© The Friday Times