A senior Iranian official told CNN that Tehran is considering allowing a limited number of oil tankers to pass through the Strait of Hormuz — but only on the condition that the oil cargo is traded/settled/paid for in Chinese yuan rather than US dollars.
This comes amid an ongoing regional conflict involving US-Israel-Iran tensions that has disrupted shipping through the strait, with Iran previously vowing to keep it closed and oil prices spiking above $100/barrel in response.
The Strait of Hormuz remains one of the world’s most critical energy chokepoints: roughly 20–21% of global seaborne oil trade and a significant portion of LNG passes through this narrow waterway between Iran and Oman. Any conditional access tied to currency could symbolically — and potentially practically — chip away at the dollar’s dominance in oil pricing.
The modern petrodollar arrangement traces to 1973–1974 agreements, particularly between the US and Saudi Arabia under King Faisal, where OPEC members led by Saudi agreed to price oil exports in US dollars and invest surpluses in US Treasuries, in exchange for security guarantees and arms. This created artificial global demand for dollars, helping sustain the USD as the world’s primary reserve currency even after the end of the Bretton Woods gold standard.
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No single country can unilaterally “end” the petrodollar overnight — the system’s inertia comes from deep liquidity in dollar markets, vast USD-denominated debt, and institutional preference. However, moves like this Iranian proposal add to ongoing de-dollarization trends:
-Russia and Iran already sell much of their oil to China in yuan (or rubles/yuan blends) to evade sanctions. China has pushed yuan-denominated oil futures on the Shanghai International Energy Exchange since 2018 and built payment infrastructure (CIPS) as an alternative to SWIFT.
Broader BRICS discussions have explored non-dollar energy trade. If Iran’s conditional Hormuz policy were implemented and gained traction (even partially), it could redirect some structural dollar demand toward yuan, especially for shipments heading to China (which already buys the vast majority of Iran’s sanctioned oil exports). Analysts note this would likely lead to a more fragmented oil market with parallel pricing systems rather than a full, rapid replacement of the dollar.
In short: This isn’t a global yuan takeover announcement, but it’s a provocative geopolitical signal from Iran — leveraging control over the chokepoint to accelerate de-dollarization efforts while deepening ties with China amid war and sanctions. The proposal highlights how energy, currency, and military power remain deeply intertwined.
Yuan-denominated oil futures refer primarily to the crude oil futures contract (ticker: SC) traded on the Shanghai International Energy Exchange (INE), a subsidiary of the Shanghai Futures Exchange. Launched on March 26, 2018, this is China’s flagship effort to create an internationally accessible, RMB (yuan)-priced benchmark for crude oil, often called the “petroyuan” in geopolitical discussions. Traded and settled in Chinese yuan (RMB) per barrel (tax-exclusive quotation).
1,000 barrels per lot. Physical delivery of medium-sour crude oil reflecting Asia’s import mix; delivery warehouses in China, e.g., bonded zones for foreign participants. Open to international investors since launch (no QFII/RQFII restrictions for foreigners), with English-language support on INE’s site.
To establish an Asian/China-centric price benchmark, hedge domestic demand (China is the world’s largest oil importer), and promote yuan internationalization in energy trade. The contract remains active and liquid: Front-month contracts like SC2605 trading around 789.5 yuan/barrel, with daily volumes in the tens of thousands of lots.
Annual turnover has been massive in recent years — e.g., by late 2024, single-counted annual volume hit over 126 million lots with RMB 31+ trillion turnover. Global comparisons place it as the third-largest crude oil futures market behind Brent (ICE) and WTI (NYMEX/CME), with average daily volumes often in the 200,000–300,000 contract range (roughly 2–3 million barrels equivalent per day in front-month activity).
Liquidity has grown steadily since launch, boosted by physical deliveries, storage expansions, and participation from foreign traders though domestic Chinese entities still dominate ~80–90% of volume. This futures market underpins China’s push for yuan-based oil pricing and settlements:
It provides infrastructure for non-dollar trades, especially with sanctioned producers like Russia and Iran who already route much of their China-bound oil in yuan or yuan blends to bypass SWIFT/dollar restrictions. Iran’s reported proposal to conditionally allow limited tanker passage through the Strait of Hormuz only if oil is traded/settled in yuan directly ties into this.
It leverages the INE platform and China’s CIPS payment system to redirect flows away from dollar-denominated markets, especially for China-bound cargoes; China buys most of Iran’s exports anyway. China is expanding yuan pricing to other energies; plans for LNG futures on Shanghai Futures Exchange, potentially launching soon after early 2026 discussions.
This builds on INE crude oil’s success as the first major internationalized yuan futures product. While the INE contract hasn’t displaced Brent or WTI as the global pricing anchor due to dollar liquidity, established contracts, and institutional inertia, it has carved out a meaningful role in Asia-Pacific pricing, hedging, and de-dollarization efforts — particularly amid sanctions, geopolitical tensions, and China’s massive import needs.
If Iran’s Hormuz yuan condition gains traction, it could accelerate yuan futures usage for marginal barrels in high-risk routes.