A senior Iranian official told CNN on Friday that Iran is evaluating a "conditional opening of the Strait of Hormuz" that would require oil transactions to be settled in yuan. This proposal is seen as a challenge to Tehran's control over dollar-denominated oil prices.
The Strait of Hormuz has been effectively blocked since March 1, following the large-scale joint military strike against Iran by the US-Israeli coalition on February 28. Tensions have since escalated, with Iran retaliating against Israel and Gulf states hosting US troops while simultaneously enduring continued US military attacks.
A daily oil production cap of 20 million barrels has been reached.
The Strait of Hormuz is a critical global energy transport hub, handling an average of 20 million barrels of crude oil daily and accounting for about 20% of global liquefied natural gas (LNG) trade. Recently, international oil prices surged to their highest level since July 2022, with WTI crude oil futures rising by more than 35% in a single week.
The United Nations also warned on Friday that restricting shipping through the strait could have a “significant impact” on humanitarian operations in the region, and called on all parties to keep the waterways open.
Is de-dollarization possible if RMB-denominated pricing is changed?
Iran's proposed pricing conditions in RMB touch upon the most sensitive issue in global energy trade: the dominance of the US dollar. Currently, the vast majority of international oil transactions are denominated in US dollars, and the dollar's monopoly in the energy market is a crucial pillar of its status as a global reserve currency.
The only exception is Russian oil, which is subject to Western sanctions and has partially switched to settlement in rubles or yuan.
For years, China has actively promoted the use of the renminbi in energy transactions, including establishing renminbi-denominated crude oil futures contracts, but has consistently failed to shake the dominance of the US dollar. Discussions on de-dollarization have long been confined to regions where the dollar is opposed to other countries. However, the current reality of the Strait of Hormuz being blocked due to conflict has, for the first time, brought renminbi-denominated oil prices to the negotiating table.
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