US-Iran war: How will Yuan payments for oil passage through Strait of Hormuz impact Indian stock market, gold, silver?

US-Iran war: Amid the third week of heightened Middle East tensions, there is no sign of de-escalation. In fact, there is further escalation in the US-Iran war after the US military strikes in Iran’s main oil hub of Kharg Island. The Islamic state is mulling all options to give a befitting reply to the US and Israel. In this bid, there are reports that Tehran is mulling an attack on the backbone of Washington’s economy — the petrodollar regime.

According to a Times of India (ToI) report quoting CNN, the Iranian government is considering allowing oil tankers to pass through the Strait of Hormuz, provided they trade in Chinese yuan. Market experts believe that if Iran successfully implements this petro-Yuan plan, it will trigger short-term volatility across global financial markets. They also said that the petro-yuan framework would hit the currency and bond markets. However, due to the uncertainty, gold and silver will gain strength on the safe-haven demand.

Petro-yuan impact on stock, currency, and bond markets

Speaking on Iran’s move to the petro-dollar framework, Ponmudi R, CEO at Enrich Money, said that any discussion of oil payments through the Strait of Hormuz shifting to the Chinese yuan is likely to trigger short-term volatility across global financial markets. Energy trade has historically been settled in U.S. dollars under the petrodollar framework, and any attempt to move away from that structure introduces uncertainty for currencies, bonds, and equities.

“In the near term, equity markets are likely to remain sensitive to geopolitical developments rather than purely economic fundamentals. The United States has historically defended the dollar’s central role in global energy trade, and it is unlikely to easily accept a rapid transition toward alternative settlement currencies. Because of this, the issue extends beyond finance and enters the realm of geopolitical power, trade alliances, and monetary influence,” Ponmudi R of Enrich Money said.

Petro-yuan impact on gold and silver rates

On how the shift in oil trade from the US dollar to the Chinese yuan may impact gold and silver prices, Anuj Gupta, a SEBI-registered market expert, said that a shift from the petro-dollar to the petro-yuan framework is expected to create market uncertainty. Due to this uncertainty, gold and silver prices are expected to rise on rising safe-haven demand for the precious metals.

“Any shift from the US dollar to Chinese yuan in the oil trade is expected to put pressure on the US dollar in the currency market. In the wake of a sharp fall in the US dollar, the US inflation is expected to shoot up in a very short time, a situation that may force the US Fed to raise interest rates, leading to a liquidity crisis in the US economy, ” Anuj Gupta said.

Echoing Anuj Gupta’s views, Ponmudi R of Enrich Money said, “Gold and silver may see support during periods of currency uncertainty, as precious metals tend to benefit when confidence in the global monetary framework weakens. However, the dominance of the dollar in global reserves and financial markets means that any transition toward a multi-currency system would likely be gradual rather than immediate.”

Impact on Donald Trump

Amit Goel, Chief Global Strategist at PACE 360, said that mid-term US elections are scheduled in November this year. Any rise in inflation would be negative for Donald Trump’s Republican Party candidates. So, Tehran wants to destabilise the US President in his own country without using a single piece of ammunition.

However, the Enrich Money expert said that for a structural shift to take place, it would require mutual understanding and coordinated agreement among major energy producers, consuming nations, and global financial institutions. Without such coordination, unilateral moves toward alternative settlement currencies could create instability in trade settlement systems, shipping insurance mechanisms, and global clearing networks.

BRICS angle you must know

“Remember, Iran is a permanent BRICS member, participating in the group’s efforts to foster economic cooperation among emerging markets. The bloc has been busy challenging the US-led petrodollar framework,” said Amit Goel of PACE 360.

The PACE 360 expert said that Tehran believes any move to challenge American dominance in the global oil trade will receive support from Russia and Brazil as well. China will definitely support a petro-yuan bid by Iran, as it would strengthen Chinese might in the global oil trade,” said Amit Goel of PACE 360.

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