Hello everyone i hope u all doing well. For more than 50 years the global oil market has largely worked under what is known as the petrodollar system.
In 1974 an agreement with Saudi Arabia established that global oil trade would be conducted in US dollars. Because oil is the most important energy resource in the world this meant that countries needed to hold large reserves of US dollars in order to buy it.
Over time this strengthened the role of the dollar in global finance and helped the United States maintain strong influence in the international economic system.
Now a different signal is coming from Iran.
Iran is focusing attention on the Strait of Hormuz one of the most critical energy routes in the world. Around 20% of the world oil supply passes through this narrow waterway. The strait itself is about 33 km wide and only a small shipping lane is used by oil tankers.
Each year oil worth around $1 trillion moves through this route.
Major oil importers that depend on this route include China India Japan and South Korea.
Iran has indicated that oil trade connected to this route could be conducted in Chinese Yuan instead of US dollars. If this direction grows it could challenge the traditional system where oil is priced and traded mainly in dollars.
Countries like China and Japan also hold large amounts of US Treasury bonds. Any shift in oil payment currencies could influence how countries manage their reserves and financial strategies.
This topic is not only about oil.
It is about energy routes currencies and global economic influence.
In todays world control over trade routes and payment systems plays a major role in shaping financial power.
What do you all think?
If oil trade begins shifting away from the US dollar how could that affect the global financial system in the long term?
Looking forward to hearing other perspectives from the Forum.
Source: https://www.turkiyetoday.com/region/iran-may-allow-hormuz-oil-shipments-if-traded-in-yuan-report-3216209
