ONE MORE step by Iran to tighten its vice on shipping via the Strait of Hormuz could have a long-term impact on the capital market within the Middle East and more when – not if – it disallows all cargo transport, from energy stocks to fertilisers and helium, priced in US dollars.
This drastic step has already been foreshadowed by the Persian nation’s public announcements, and here’s how the dominoes will likely fall over the next few weeks.
Iran’s Islamic Revolutionary Guards Corps is now inspecting every vessel passing through the narrow strait and imposing a toll payable in Chinese yuan. Unauthorised ships are at risk following the US-Israel attack from the 28 Feb 2026.
Due to soaring war insurance premiums, total ship traffic has shrunk to just about 150 vessels – including tankers and container ships – since, according to Lloyd’s List Intelligence shipping information firm. Only vessels which obtained permission from Iran have left the strait.
With Iran’s shipping bar, we have seen US dollar-denominated market prices surge on supply concerns. But shipping traffic priced in yuan – and possibly even roubles or the Indian rupee – are steady as these vessels are allowed to pass by Iran.
But its hardline stand against any US interests in the region, from military to economic, could shatter the petrodollar hegemony – and possibly even reverse soaring US dollar-denominated oil prices, with Iran’s transit control over about 20% of the world’s oil supply chain.
How?
When Iran imposes its transit ban on US dollar-priced contracts, such cargo will soon get discounted heavily to secure dwindling sales. Sellers will be forced to price using other currencies. The six Gulf Cooperation Council (GCC) nations may have to ditch US dollar pricing to get full value of their oil and other exported cargo.
The next evolution is obvious. The Kuwait example of pegging its dinar against a basket of currencies will likely become the model for Bahrain, Oman, Qatar, Saudi Arabia and the UAE. Or these six GCC nations may scrap altogether their currency peg to the US dollar.
The global capital market may otherwise find itself in a deeper financial crisis as the US dollar itself is already at great risk of devaluation. Though oil-rich, the GCC capital market would be devalued similarly against the euro, yuan and more if they keep their currencies pegged to the US dollar.
We have already seen this occur with the sharp Iran rial devaluation from the 24 Feb 2026, ahead of the military attack. Can the GCC nations afford a similar economic crash? If their capital markets implode – from expansive Sukuk to sovereign funds – can other markets withstand the economic shock?
The US dollar depreciation is already seen in recent months – losing the GCC petrodollar anchor would be further compounded by the latest US Treasury Department’s bleak figures for fiscal year 2025.
With US$6.06 trillion in total assets against US$47.78 trillion in total liabilities as at the 30 Sept 2025, the Treasury also noted the need to add US$88.4 trillion in off-balance-sheet obligations. The total federal obligations of US$136.2 trillion would then be almost five times the US$30.62 trillion US GDP for 2025. Other currencies have collapsed under such sovereign debt.
Everyone is waiting with bated breath on what is going to happen next. But smarter minds would already be hedging their investments by shifting to currencies other than or linked to the US dollar.