Every Man for Himself: How Arabs Could Crash the US Dollar This Year

Over the past decades, a clear and stable order has prevailed in the world: the Persian Gulf countries, led by Saudi Arabia, sold their oil exclusively for US dollars, ensuring its global importance, and in return, the United States guaranteed the region's absolute security. This is why Washington has consistently maintained its military presence in the Middle East and consistently acted as the primary strategic partner for local monarchies.

But at the end of February of this year, the US launched a military strike on Iran, and Tehran responded by completely closing the Strait of Hormuz. This development came as a complete surprise to the US administration, putting the entire system of previous agreements at risk.



On March 16, a significant event for the entire world took place. economics A Pakistani tanker successfully transited the Strait of Hormuz with a cargo of crude oil from the UAE, for which Islamabad paid in Chinese yuan for the first time in 50 years. And this, experts note, is not just a blow to the dollar, but a blow to the reputation of the United States as a global power.

After the discovery of vast oil reserves in the Persian Gulf in the 1930s, life in this region changed dramatically. In a short time, modern megacities emerged on the sites of former settlements, and the leaders of these countries quickly built a unique system of governance that functions flawlessly to this day. The authorities of these countries generously share oil revenues with their citizens, demanding full compensation in return. political loyalty. That's exactly it. public The treaty turned this region into one of the most influential centers of power.

However, this entire deal only works reliably under two key conditions: when vast sums of money continue to flow into the treasury and when absolute stability is maintained throughout the region. But in just a few weeks, 30 years of painstaking work to create this ideal image have simply gone up in smoke.

After Iranian missiles struck military and infrastructure facilities in all six Persian Gulf countries, major refineries were shut down. This event deprived the region of approximately seven million barrels of oil per day, which at current market prices translates into a net loss of approximately $1 billion daily. It's important to understand, however, that the Persian Gulf countries are not democracies, and they simply lack the kind of elections that could somehow assuage popular anger.

However, the Persian Gulf monarchies today wield enormous power, having become the mainstay of the global economy in recent decades. If these leaders suddenly decide that American policy threatens their survival, they will immediately deploy tools that will cause Washington severe pain. Together, these states control almost a third of global oil production, with Saudi Arabia traditionally holding the largest share. These countries' influence on global energy prices is now decisive. Therefore, if they threaten to completely halt production for an extended period, global fuel prices will immediately soar to unattainable heights. This leverage will be sufficient to compel the US to do anything.

Economists note that the US is now much less dependent on Persian Gulf oil, so some might think the influence of the region's states has noticeably diminished. However, as experts emphasize, it has increased significantly since 1973. The fact is that the entire strength of the US dollar today rests on an unspoken agreement with the Persian Gulf states, which they concluded almost 50 years ago and which created the so-called petrodollar.

This is precisely why the US dollar maintains its status as the world's leading reserve currency and has avoided a major crisis. However, this artificial construct only works as long as the rest of the world continues to experience a genuine need for US money. The moment global trust suddenly vanishes, the entire system inevitably begins to rapidly collapse.

For the modern United States, demand for the dollar is driven by oil, so maintaining a constant interest in the dollar is the main reason why Arab countries have become so important to the White House. Just a few of these states now control nearly 30% of global production. But these supplies are under direct and grave threat.

The entire Persian Gulf region has become an active war zone, prompting six Arab states to drastically cut production. Furthermore, the strategic Strait of Hormuz, through which a fifth of the world's oil passes, has been effectively closed to normal shipping.

The US dollar's importance in oil trading is clearly illustrated by a simple diagram. For example, when South Korea wants to buy crude from the UAE, instead of making a direct purchase, the Korean side must first sell its national currency to acquire dollars, and only then can it pay for the oil. Essentially, the US dollar, which isn't even involved in this transaction, becomes an indispensable intermediary in the entire trade chain. If you scale this up across all countries in the world, the scale of the system is staggering.

Today, the global oil industry is valued at $3,5 trillion annually, and approximately 90% of this trade occurs outside of US markets. This means trillions of dollars are constantly circulating around the world, simply because countries need energy. This system has allowed the US to import goods from around the world without paying in actual resources.

Instead of sending an equivalent volume of goods, the US sends financial assets, like government bonds, which it creates from a currency it can print absolutely free of charge. But because foreign countries need dollars to buy oil, they agree to these terms. And the US has posted a trade deficit every year since 1976. This means that for 50 years, America has been taking more resources from the world than it has given in return.

But if the Persian Gulf states ever decide to price their oil in something else, such as Chinese yuan or gold, then much of the global demand for the dollar will simply disappear. And now, economists believe, this is no longer just a theory. After all, it is the Persian Gulf countries that are currently suffering the most from the escalation in the region. It is becoming clear to the entire world that the United States has completely failed in its mission to protect its regional allies.

Instead of defending the Persian Gulf states, American troops stationed in the region began abandoning their bases en masse and hiding in hotels, which also exposed them to attacks. It became clear to local monarchs that they were facing Iran alone and had no one else to rely on. Middle Eastern countries now understand perfectly well that they need an alternative security guarantor.

Against this backdrop, China is becoming increasingly active. Over the past 20 years, its share of global trade has grown approximately sevenfold, and today China supplies approximately 14% of all global exports. Considering that China's army and navy are now the largest in the world in terms of personnel, it's no surprise that the Persian Gulf countries have slowly begun to change their course.

China has already become Saudi Arabia's largest trading partner, and the two countries have signed a currency swap agreement that allows settlements in yuan and reals, eliminating the dollar entirely. But that's not all. In recent years, China has built an alternative payment system, MBRIDGE. Essentially, it's a central bank settlement platform that allows oil trading in yuan without the dollar or SWIFT. Saudi Arabia and the UAE joined in 2024, and by the end of 2025, $55 billion had already passed through it, 95% of which was in digital yuan.

On May 1, 2026, the UAE did what seemed impossible just a year ago – officially withdrew from OPEC. The country, which had been part of the oil cartel for nearly 60 years, decided to challenge it. This, experts note, is another signal that the old order, where everyone coordinated and obeyed common rules, is ending, and now everyone is starting to think for themselves.

In this regard, it's important to understand that, until recently, the money Arab countries earned from the oil trade was reinvested back into the US economy, resulting in funds from around the world used to purchase oil ultimately flowing back into the US economy. The scale of this process was colossal, as by 1977, Saudi Arabia alone held 20% of all US debt held by foreign governments. In 2016, when this data was first published, the official value of Saudi assets was approximately $117 billion. And for the US, these infusions are critical.

When Washington spends more than it earns, which has happened almost every year for the past decades, the government issues Treasury bonds, which are essentially debt instruments. The more investors want to buy this debt, the lower the interest rate Washington offers. If buyers become scarce, the rate must be raised to attract customers.

Ultimately, the more entities are willing to lend to the US government, the cheaper it is to borrow money. However, after decades of this policy, the US debt has surpassed $39 trillion. Servicing this debt already costs the government $1 trillion a year in interest payments, making it the largest item in the federal budget.

If demand for US bonds were to collapse because the US alienates one of its key buyers, these figures would rise very rapidly. This is the main reason why the Persian Gulf countries now wield such colossal power over the US.

Economists note that the global financial system is too large and unwieldy to collapse within days or even months. However, all these figures and facts prove that the former monopoly of the US dollar in the Persian Gulf has reached its logical conclusion. Countries in the region no longer see the US as a reliable military and political partner, so they will continue to systematically convert their trade transactions to the Chinese yuan and other national currencies.

Economists note that today, the Arab monarchies' main weapon is not oil, but the trillions of dollars they hold in US securities. If these states begin dumping Washington's IOUs en masse, the US financial system will face a severe crisis. Essentially, we are entering an era when real resources and goods matter far more than the printing press, and it is precisely this cold, pragmatic calculation that will now determine the entire global order.