The world wouldn’t know for another 50 years what Nixon and Kissinger replaced it with, striking a deal that would quietly govern the global economy for the next half-century. Riyadh agreed to price and trade its oil in U.S. dollars and channel its petroleum windfalls back into U.S. Treasury bonds; in return, Washington promised military aid, equipment, and security guarantees—a deal that would quietly govern the global economy for the next half-century.
Qatar and the UAE rely on the strait for virtually all of their LNG exports, representing about 20% of global LNG trade. The bulk of the crude leaving the strait heads to China, India, Japan, South Korea, and other Asian markets, which absorb the overwhelming majority of Hormuz volumes. When Iran slammed shut this door, it didn’t just disrupt shipping lanes. It placed maximum stress on the architecture of dollar dominance at its most physical chokepoint.
The administration has cycled through a list of increasingly desperate options, from building a naval coalition—with Trump saying he’d approached “about seven” countries—to a reported proposal to wind down the conflict without resolving the Hormuz closure. As of Monday, Trump told CNBC: “We are very intent on making a deal.”
What the Hormuz crisis means isn’t an end to the petrodollar—it is a threat to accelerate a shift that was previously moving at a glacial pace by raising the geopolitical temperature around a system that had long operated below the radar. Every week the strait stays closed, Asian economies are forced to test alternative supply chains — existing bypass routes like Saudi Arabia’s East-West Pipeline and the UAE’s Abu Dhabi Crude Oil Pipeline to Fujairah absorb only a fraction of normal Hormuz volumes, meaning the pressure to find workarounds is real — and, at the margin, alternative payment mechanisms. If the crisis is resolved in weeks, those experiments are quickly abandoned. If it drags into months, habits begin to form. The dollar’s dominance is not a cliff—it is a long, slow slope—and the question the Hormuz standoff raises is not whether America falls off the edge today, but whether Trump’s handling of this crisis steepens the gradient.
There is a long slope down from this exorbitant privilege, as there remains no obvious successor to the dollar. And for all of Iran’s saber-rattling, its closure of the Strait of Hormuz is not a sophisticated financial weapon aimed at the dollar’s structural foundations. Rather, it is a desperate act of asymmetric warfare by a regime under unprecedented military pressure—a tactical move, not a strategic master plan.
For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.
