Petrodollar: Beginning of the end? Deutsche sees chance for Beijing

Analysts are warning that the fallout from the Iran conflict — notably disruptions to crude flows and heightened shipping risks — has increased the likelihood of structural shifts in how oil is traded, and some bankers see an opening for Beijing to press its currency agenda.

The immediate market transmission has been sharp: global benchmarks such as Brent and WTI experienced rapid spikes and elevated volatility as supply fears around the Strait of Hormuz intensified, prompting large weekly gains in crude futures and a move into traditional safe havens. Reuters reporting shows U.S. crude futures and Brent jumped markedly in the first weeks of the conflict, amplifying inflation concerns for energy-importing economies.

Deutsche Bank commentary draws attention to China’s growing pool of foreign-currency assets and onshore liquidity: data cited by Bloomberg indicates Chinese banks’ foreign-exchange holdings rose materially, giving policymakers room to liberalise cross-border capital flows and broaden renminbi-denominated settlement mechanisms. Deutsche Bank’s Hong Kong-based Greater China strategists argue that such a window could accelerate steps toward using the yuan more widely in energy contracts.

Market implications are twofold. In the near term, oil-price shocks feed through to consumer inflation and risk assets, prompting central banks to weigh policy trade-offs. In the medium term, sustained use of non-dollar settlement in significant bilateral energy flows would gradually reduce structural dollar demand — but major hurdles remain, including depth of yuan liquidity offshore, settlement networks and geopolitical acceptance. Bloomberg and policy think-tanks note that while momentum for de-dollarisation exists, the dollar’s dominance is durable absent an organised, liquid alternative.

Looking ahead, strategists expect continued volatility. If disruptions persist, China could opportunistically expand renminbi clearing, swap lines and bilateral settlement agreements, testing the petroyuan’s reach. Yet most observers caution that any meaningful displacement of the petrodollar would be gradual and contingent on sustained policy moves by exporters, major importers and global financial intermediaries. The consensus view is that the Iran conflict has heightened the stakes and accelerated debate — but conversion from debate to durable market practice will require time and significant institutional change.