Iran may allow oil tankers through Hormuz if paid in yuan, official says

Iran is considering allowing a limited number of oil tankers to pass through the Strait of Hormuz on the condition that the cargo is traded in Chinese yuan, a senior Iranian official told CNN on Friday. The official said the potential move is part of Tehran's plan to manage the flow of oil tankers through the strategic waterway, which has been effectively closed since March 1 following US-Israeli attacks on Iran.

Challenging dollar dominance

Global oil is predominantly traded in US dollars, except for sanctioned Russian oil, which is priced in rubles or the yuan. CNN noted that China has sought for years to expand the use of yuan in oil transactions, but the dollar remains the world's primary reserve currency. The yuan-for-oil proposal would represent a significant shift in energy trade dynamics if implemented.

Market impact

Concerns about disruptions in the strait, a critical route for the world's energy supply, have pushed oil prices to their highest since July 2022. The Strait of Hormuz carries about 20 million barrels of oil daily and roughly 20% of global liquefied natural gas trade. The UN warned Friday that restrictions on shipping through the strait could have a "massive impact" on humanitarian operations in the region.

Conflict context

Tehran has effectively closed the Strait of Hormuz since March 1, following Israel and the US launching joint attacks against Iran on Feb. 28, which have so far killed around 1,300 people, including former Supreme Leader Ayatollah Ali Khamenei. Hostilities have since escalated, with Iran retaliating against Israel and Gulf states hosting US assets while defending its territory from ongoing US-Israeli strikes.