Still king – why the petrodollar isn’t going anywhere soon

Articles Still king – why the petrodollar isn’t going anywhere soon 13:51 FX Trade China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Recent tensions in the Middle East have revived debate about whether the petrodollar system is starting to fragment. Our answer is a cautious one. Some diversification in oil trade settlement is plausible, but the bigger question is where Gulf oil savings are ultimately invested.

On both fronts, change looks gradual rather than transformative Dmitry Dolgin , Chris Turner and Lynn Song Calling an “end of the petrodollar” would be a bold claim, with any shifts in the story likely to be slow-moving Recent tensions in the Middle East have brought the petrodollar debate back into focus. The immediate market question is whether disruptions to energy trade could accelerate the use of non-dollar currencies in energy-related transactions. That matters because any such shift would add to the broader debate about the global role of the dollar.

Still, declaring “the end of the petrodollar” would be a strong call. As with other de-dollarisation themes we’ve covered, the reality seems to be less dramatic than the media headlines. We support the approach of looking separately at trade invoicing and asset allocation.

On the trade side, China’s growing importance as a buyer of Gulf energy, the gradual build-out of renminbi payment infrastructure, and renewed interest in alternative payment channels are all relevant. But the international role of the dollar also depends on where the savings of major energy exporters are ultimately allocated. That is the key question we address in this article; the broad conclusion is that some petro-settlement and investment activity may become marginally more diversified, but the core of the petrodollar system still looks much harder to dislodge.

Executive summary Shift in oil settlement: evidence inconclusive. March 2026 saw a pick-up in renminbi settlement activity via China’s Cross-Border Interbank Payment System (CIPS), coinciding with the outbreak of the Iran war, but volumes moved closer to normal in April and May. SWIFT trade finance data also shows only a modest March spike after an earlier upward trend in 2022–2024.

China’s growing role in the Gulf is a watch factor , with its share in GCC exports and imports nearly doubling over the past decade to about 21%, alongside a build-up in non-dollar settlement infrastructure through the UAE-China swap agreement, mBridge cooperation and the UAE central bank’s memorandum of understanding with CIPS. The Gulf keeps accumulating oil savings, putting SWF allocation in focus. Excluding Saudi Arabia, the GCC is projected to run combined current account surpluses of roughly $150bn per year over the next five years, implying $0.8tr in cumulative external savings through 2030.

Gulf sovereign wealth funds hold around $6tr in assets, with the UAE estimated at about $2.7tr, leaving the key question of where these pools of oil wealth are ultimately invested. GCC is USD-heavy by global standards , with 69% of BIS-tracked international assets in US dollars versus 46% globally. This does not capture sovereign wealth funds directly, but it does suggest that Gulf external finance is more dollar-heavy than the global norm.

What might Gulf de-dollarisation look like? From the invoicing angle, China’s share in GCC trade points to an upper bound of about $300bn in annual flows that could be yuan-settled in an extreme case. From the asset side, any de-dollarisation would more likely show up through slower new inflows rather than reallocation of the existing stock.

Even a reduction in new USD allocations below roughly $100bn per year would already represent a move in that direction. GCC in the global context: central but not exclusive. The Middle East accounts for around one-quarter of global fuel exports, while fuel trade makes up only 10-12% of global merchandise exports, limiting the impact on global de-dollarisation.

Broader de-dollarisation remains slow, suggesting scope for gradual diversification rather than a decisive break with the dollar. The euro or RMB could use their strengths to create marginal competition with the dollar, but the dollar system still looks far more resilient than the louder de-dollarisation narratives imply. Market implications: Dollar dominance in GCC energy invoicing contributes to network benefits, while dollar funding markets proved resilient during the peak of the crisis in March.

Shift in oil settlement: evidence inconclusive The new war in the Middle East has revived interest in whether the search for non-dollar energy invoicing could gain pace. Yet publicly available data remains limited, and the available evidence is mixed. The pick-up in renminbi settlement activity in March via CIPS has been cited by some observers, including the European Central Bank , as an indirect sign of a shift in energy invoicing.

So far, however, the evidence remains inconclusive. After a spike in March, CIPS volumes returned closer to normal in April and May, despite the ongoing tensions in the region. SWIFT trade-finance data tells a similarly cautious story: renminbi usage had already been trending higher in 2022-2024, but the increase in March 2026 was relatively modest and was followed by some retrenchment in April.

The spike in CNY transactions in March appears to be a one-off so far Source: ECB, CIPS, SWIFT, ING; * adjusted for FX revaluation effects "> Source: ECB, CIPS, SWIFT, ING; * adjusted for FX revaluation effects China’s growing role for the Gulf is a watch factor It is important to understand where the expectation of a growing renminbi role in Gulf fuel trade is coming from. Unlike Russia or Iran, GCC countries are not operating in a sanctions environment and remain broadly free to choose their settlement currency mix. The case for greater renminbi usage would therefore be mainly commercial.

The commercial logic starts with trade geography. China’s share in GCC exports and imports has nearly doubled over the past decade to around 21%. China’s share in GCC exports and imports has nearly doubled over the past decade to around 21% Just as importantly, Gulf trade has become more tilted towards emerging markets, which now account for around 60% of the GCC’s external trade mix – the reverse of the picture 25 years ago.

This matters for the global energy story because the GCC itself accounts for 51% of the total external trade turnover of all EM fuel exporters in the IMF’s definition, which excludes Russia (as a more diversified commodity producer). It is also notable that within the GCC, the UAE has overtaken Saudi Arabia in terms of total external trade volumes in the last 10 years. China's share in GCC trade flows nearly doubled in the last 10 years to 21% Source: IMF, ING; * Sum of exports and imports, share of China includes Hong-Kong and Macao; ** Russia in not part of IMF EM Fuel Exporters aggregate "> Source: IMF, ING; * Sum of exports and imports, share of China includes Hong-Kong and Macao; ** Russia in not part of IMF EM Fuel Exporters aggregate From the global trade and multipolar perspective, some energy transactions may gradually become less exclusively dollar-based as China deepens its trade links with major exporters and as alternative payment infrastructure develops.

The UAE-China swap agreement , mBridge cooperation and the UAE central bank’s MoU with CIPS all point to a slow build-out of the relevant infrastructure. As for China’s RMB internationalisation, the process has seen ebbs and flows over the past two decades, but is gradually moving along, with increasing RMB trade settlement and payment shares over the years. As China’s trade clout grows and it becomes the largest trading partner for more countries, a natural consequence has been a shift towards RMB-denominated settlement.

An important new development which emerged during the Iran war was when Iran requested payments to be made in Bitcoin or CNY. This is a sign that countries are considering CNY as an alternative to the traditional dollar system, an option which can help avoid US sanctions. Geopolitical developments have and could continue to play a role in the RMB’s adoption globally.

Policymakers have been prioritising financial stability over speed of internationalisation, and this is unlikely to change, even with a perceived window of opportunity from de-dollarisation trends. A lack of full capital convertibility continues to weigh on RMB internationalisation, while there appears to be relatively limited appetite for the RMB as a reserve currency. Nonetheless, efforts continue to be made in this direction, as President Xi Jinping has stated that China must have a “powerful currency”.

The People's Bank of China just announced a new repo facility to be made available to foreign central banks, international financial institutions, and sovereign wealth funds, accepting RMB-denominated collateral such as Chinese government bonds, central bank bills, and policy bank bonds. This would allow for foreign institutions to tap into the current low interest rates in China, and could encourage further RMB usage. China currently has 32 currency swap lines set up, worth up to RMB4.5tr, and these swap lines have increasingly shifted from symbolic agreements to actively used liquidity tools.

By the end of 2025, the outstanding balance of RMB drawn by overseas central banks stood at RMB94.2bn. China continues building infrastructure for RMB internationalisation Source: PBOC, ECB, IMF, ING; * Pre-2025 shares of RMB in global FX reserves adjusted for FX revaluation "> Source: PBOC, ECB, IMF, ING; * Pre-2025 shares of RMB in global FX reserves adjusted for FX revaluation Overall, higher Gulf exposure to China is not a death sentence for the dollar as a petro-currency. The rising role of China in global trade does not automatically translate into a comparable rise in the role of the renminbi.

And if Gulf economies continue to invest heavily in domestic fuel, logistics and defence infrastructure, imports are still likely to remain diversified across both developed and emerging market partners. On the subject of swap lines, much was made earlier this year of the UAE’s request for a standing dollar swap line to join the elite club of the eurozone, Japan, the UK, Switzerland and Canada. This story has gone quiet over recent months, but one can only conclude that the UAE still sees itself very much part of the dollar universe – anchored, of course, by the USD/AED peg.

The Gulf keeps accumulating oil savings… The more important question for the dollar story is not just how Gulf exports and imports are invoiced, but whether the region still generates external surpluses large enough to matter for global capital markets. Some have argued that rising domestic expenditure and imports mean the GCC no longer produces large enough current account surpluses to remain relevant as a capital exporter. IMF projections imply a cumulative current account surplus of around $0.8tr through 2030 that will need to be allocated by the GCC ex.

Saudi Arabia into global assets The IMF projections suggest otherwise. While Saudi Arabia alone is expected to remain closer to the current account deficit, the wider GCC still looks highly relevant as a source of external savings. Excluding Saudi Arabia, the GCC – mainly the UAE, Qatar and Kuwait – is projected to run a combined current account surplus of roughly $150bn per year over the next five years even under an oil price assumption of $70-80 per barrel.

That implies a cumulative surplus of around $0.8tr through 2030 that will need to be allocated by the GCC ex. Saudi Arabia into global assets. Excluding Saudi Arabia, the GCC will have $0.8tr of current account surplus to allocate through 2030 Current account balance for GCC and other EM fuel exporters* Source: IMF, ING; * Russia doesn't match the export concentration criteria for IMF's EM Fuel Exporters aggregate "> Current account balance for GCC and other EM fuel exporters* Source: IMF, ING; * Russia doesn't match the export concentration criteria for IMF's EM Fuel Exporters aggregate ...putting the sovereign funds’ asset allocation in focus Persistent current account surpluses suggest that the region is likely to remain important not only for trade invoicing, but also for the currency mix of global financial assets.

In the GCC, sovereign wealth funds are the key players. We have touched on this previously; in oil-producing economies, sovereign funds are often the dominant investors and can dwarf central bank reserve holdings. Originally established to preserve and grow finite hydrocarbon wealth for future generations, Gulf sovereign wealth funds now hold combined assets under management of around $6tr, which is over one third of the value of the world’s 100 largest sovereign funds .

Gulf sovereign wealth funds now hold combined assets under management of around $6tr Four of the six GCC countries are among the world’s top 10 sovereign wealth fund holders, and the UAE hosts the largest combined SWF assets in the region with a combined value estimated at $2.7tr. The GCC asset allocation choices matter for the future of the petrodollar no less than the currency of trade invoicing does. The Gulf holds more than a third of world's sovereign wealth assets Source: GlobalSWF, IMF, SWF Institute, media, national sources, ING "> Source: GlobalSWF, IMF, SWF Institute, media, national sources, ING GCC is USD-heavy by global standards So how dollarised is the GCC, and how much could that change?

That is the trillion-dollar question, and the direct data is almost as scarce as it is for trade invoicing and settlement. The GCC’s influence is not especially visible in the IMF's Currency Composition of Official Foreign Exchange Reserves (COFER) data because the region’s central bank reserves are relatively small compared with sovereign wealth funds, while sovereign funds are generally far less transparent than central banks about asset allocation. US data on foreign holdings of Treasuries or broader US assets is also of limited help, because they are heavily distorted by Europe’s custodial role through financial centres such as the UK, the Benelux countries and Switzerland.

We therefore use an indirect proxy: the banking system’s international balance sheet. BIS locational banking statistics provide a currency breakdown of global banks’ liabilities to financial and non-financial sectors in each reporting country. While this does not capture sovereign wealth funds directly, it still offers a useful window into the broader currency mix of external finance.

By that metric, Gulf external finance remains much more dollar-heavy than the global norm. At the end of 2025, around $0.6tr – or 69% of international assets linked to GCC financial and non-financial sectors – was denominated in US dollars, compared with a global aggregate of 46%. Around 69% of international assets linked to GCC are denominated in US dollars, compared with a global aggregate of 46% The GCC also appears underweight the euro, at roughly 8% versus a 34% global aggregate, while showing a somewhat higher preference for non-core currencies.

Notably, the dollar share in the GCC’s cross-border assets appears to have risen over the past decade, in contrast to the broader global trend. GCC's external finance is highly dollarised by global standards Source: BIS, Refinitiv, ING; * Pre-2025 shares recalculated according to FX rates as of YE25 "> Source: BIS, Refinitiv, ING; * Pre-2025 shares recalculated according to FX rates as of YE25 It remains an open question as to how well BIS locational banking statistics proxy the currency composition of sovereign wealth funds, most of which are deliberately structured outside the domestic banking perimeter. Even so, there are reasons to take the signal seriously.

First, the dollar pegs in GCC countries naturally reinforce the dollar’s role in both trade and capital flows. Second, Norway offers a useful cross-check because it publishes the currency composition of its sovereign wealth fund. There, BIS cross-border banking data does not replicate the sovereign fund allocations exactly, but it does capture the broad ranking of currencies relatively well; the US dollar is clearly dominant, followed by a group of non-core currencies and then the euro.

That suggests the Gulf’s above-average dollarisation in cross-border balance sheets is unlikely to be meaningless. For Norway, BIS banking data is a good proxy for SWF FX structure Source: BIS, NBIM GFPG, Refinitiv, ING; * Pre-2025 shares recalculated according to FX rates as of YE25 "> Source: BIS, NBIM GFPG, Refinitiv, ING; * Pre-2025 shares recalculated according to FX rates as of YE25 If the BIS GCC banking data broadly reflects sovereign wealth-fund preferences, this would imply that a very large stock of the Gulf’s sovereign wealth is likely to be already allocated in dollar assets – at least $4tr – alongside much smaller allocations to non-core currencies ($0.6tr) and the euro ($0.5tr). A very large stock of the Gulf’s sovereign wealth – at least $4tr – is likely to be currently allocated in dollar assets What might Gulf de-dollarisation look like?

The next question is what the practical limits of Gulf de-dollarisation would be if the region were hypothetically to pursue it. This could be considered a stress test (not a forecast!) designed to illustrate the scale of any plausible change and the surrounding constraints. Russia provides one extreme reference point.

Since 2014, Russia’s external trade and reserve mix has experienced a foreign policy-driven shift towards China and renminbi, and this process has accelerated rapidly since 2022 under the pressure of sanctions and reserve freezes. By 2025, the renminbi’s share in Russia’s external trade invoicing had risen to match China’s 30-33% share in Russia’s trade. In Russia’s liquid sovereign savings, the renminbi also gained a dominant role because other reserve currency options had effectively been removed.

The yuanisation of Russia's foreign trade matches China's share in its exports and imports Source: China customs, Bank of Russia, ING "> Source: China customs, Bank of Russia, ING The Gulf, however, is self-evidently not Russia. The geopolitical setting and scale are entirely different. A simple translation of Russia’s experience into the GCC would therefore be misleading.

At most, Russia offers a far-end reference for how far trade settlement can move when constraints are extreme, which, in the case of the GCC, would also match China’s role in the region’s external trade – currently around 20%. In an extreme case, up to $300bn out of $1.5tr in GCC’s annual exports and imports turnover could be invoiced in RMB. In an extreme case, up to $300bn out of $1.5tr in the GCC’s annual exports and imports turnover could be invoiced in RMB On the asset side, the constraints are even stronger.

Existing GCC sovereign wealth fund assets are too large to be reallocated quickly. In practice, if de-dollarisation occurred at all, it would most likely show up through new allocations rather than through a large-scale restructuring of the existing stock. With projected annual current account surpluses of roughly $150bn, even a hypothetical reduction in new USD allocations below 70% of that sum, or $100bn per year, would already represent a move toward de-dollarisation.

But that would still be very different from a rapid retreat from the dollar as the dominant store of Gulf wealth. All of our discussion so far has centred on potential opportunities for the renminbi. Yet in our previous research , we have been drawn to a multipolar currency worl