UAE signals shift from dollar as US war policy strains oil trade

DUBAI (MNTV) — The United Arab Emirates has signaled that the dominance of the US dollar in global oil trade may come under threat, as fallout from Washington’s war on Iran continues to destabilize energy flows and financial systems across the Gulf.

According to reports, UAE officials raised concerns directly with the US Treasury and Federal Reserve during recent meetings in Washington, suggesting the need for a currency swap line to secure access to dollars if liquidity tightens.

Such a mechanism would allow the UAE central bank to stabilize its currency, the dirham, which is pegged to the US dollar, and reinforce foreign exchange reserves in the event of prolonged disruption.

Despite holding around $270 billion in foreign exchange reserves and vast sovereign wealth assets, the UAE is facing mounting pressure as Iranian actions — triggered by US and Israeli military escalation — have damaged regional energy infrastructure and restricted oil exports through the Strait of Hormuz.

The disruption is directly impacting dollar-denominated revenues, exposing vulnerabilities in the current system.

In a notable warning, UAE officials indicated they may be forced to conduct oil transactions in alternative currencies, including China’s yuan, if access to dollars becomes constrained.

The remarks underscore growing frustration in the Gulf over a conflict widely seen as initiated by Washington, with regional economies now bearing the economic consequences.

Any move away from the dollar by a major oil producer like the UAE would mark a significant shift in the global financial order.

Since 1974, when Saudi Arabia began pricing oil exports in dollars, the currency has dominated global energy trade, reinforcing its position as the world’s primary reserve currency and giving Washington what critics describe as an “exorbitant privilege.”

However, analysts warn that the ongoing war risks accelerating cracks in this system. Economists at Deutsche Bank noted that sustained damage to Gulf economies could reduce their accumulation of dollar-based assets, potentially weakening the foundations of the so-called petrodollar regime.

Reports suggesting that Iran may allow passage through the Strait of Hormuz in exchange for yuan-denominated oil payments are being closely monitored as a possible turning point.

If such trends continue, the conflict could be remembered as a catalyst for the gradual erosion of dollar dominance and the emergence of alternatives such as the “petroyuan.”

A weakening dollar position would have far-reaching consequences beyond oil markets. The United States has long benefited from issuing debt at relatively low costs due to the dollar’s global reserve status. Any decline in confidence could ripple through bond markets and broader financial systems.

Still, some analysts argue that a complete shift away from the dollar remains unlikely in the near term. They point to the scale, liquidity, and global integration of US financial markets, as well as the entrenched network effects that continue to anchor the dollar at the center of global trade and finance.

Others also note that Gulf states, including the UAE and Saudi Arabia, may remain strategically tied to Washington despite tensions, particularly given China’s growing alignment with Iran.

Nevertheless, the signals emerging from the UAE highlight a deeper reality: Washington’s military and economic policies are increasingly testing the very system that underpins its global financial dominance.