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Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story

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Hormuz crisis won’t replace the dollar with yuan. De-dollarisation is a myth

Recent data does not support any dramatic shift away from the dollar. As per IMF, the share of international transactions conducted in dollars has declined from 56.90% to 56.77%.

The ongoing Iran War has now shifted into a largely non-kinetic phase characterised by maritime blockades, digital warfare, and economic strangulation. As drone and missile strikes have largely subsided, strategic discussions have centred on the Strait of Hormuz being ‘double-blockaded’—with both the Islamic Revolutionary Guard Corps and the United States Central Command restricting maritime flows.

This disruption of one of the world’s most critical energy chokepoints has also revived familiar debates around de-dollarisation and the decline of the so-called “petrodollar system”. Yet much of this discourse remains analytically weak—overstated, historically shallow and often detached from actual financial data.

The central assumption is straightforward: increasing geopolitical unpredictability, especially due to the US policy volatility, has encouraged countries to reduce reliance on the dollar in trade and reserves. This narrative is often supported by claims of a rising “petroyuan,” greater gold accumulation, and a broader fragmentation of the dollar-centric order.

In the context of the Iran War, this argument is pushed further—that Gulf countries, wary of instability and the US’s role, will drift away from the petrodollar system, accelerating the decline of American monetary dominance.

Not all is false. It’s pitched incorrectly.

These claims rest on two major analytical fallacies. First, a conflation of de-dollarisation with the petrodollar system. Second, a misunderstanding of how both phenomena actually function in the contemporary global economy.

Fundamentals vs myths

To begin with, de-dollarisation and the petrodollar system are related but different concepts. De-dollarisation refers broadly to the trend of reducing reliance on the US dollar in global trade, financial transactions and central bank reserves.

By contrast, the petrodollar system specifically refers to the pricing and trading of oil in dollars and the subsequent recycling of oil revenues into dollar-denominated assets—one of the key powers of Pax Americana.

Recent data does not support any dramatic or systemic shift away from the dollar. According to the latest International Monetary Fund (IMF) figures, the share of international transactions conducted in US dollars has declined only marginally—from 56.90 per cent to 56.77 per cent. More importantly, the limited decline has not translated into a surge in the Chinese yuan. The gains have instead accrued primarily to rise in other currencies: mainly the euro, followed by the Japanese yen and pound sterling (together).........

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