UAE warns US it could sell oil in Chinese yuan if war disrupts dollar flow

The UAE has reportedly warned the US that it may have to sell some of its oil in Chinese yuan if the war with Iran causes a shortage of US dollars in the Gulf, a move that could have implications for the petrodollar system.

Gulf states usually sell oil in US dollars. If a major oil producer such as the UAE starts using Chinese yuan instead, even for some sales, it would be viewed as a significant development in global energy markets and international finance.

Read: UAE discusses US financial backstop as Iran war threatens deeper economic crisis

Iranian attacks on the Gulf state, in response to the US and Israeli bombing of the Islamic Republic, have disrupted energy flows and raised concerns about access to dollars.

Reuters reported on Tuesday that US Treasury Secretary Scott Bessent said Gulf and Asian allies had requested currency swap lines, and that both the US and the UAE would benefit from such an arrangement. A swap line is an emergency mechanism that gives a country quick access to US dollars when markets come under pressure.

Reports said UAE officials warned that, if dollar supplies tighten significantly, they may have little choice but to use other currencies, including the yuan, for some oil transactions.

Read: Gulf economies risk worst slump since 1990s if Iran war drags on

There is no indication that the UAE is about to abandon the dollar. Analysts say the warning appears, for now, to be part of efforts to secure US financial backing during a crisis. It comes amid broader concern over the financial impact of the war on Iran and the vulnerability of Gulf economies to disruptions in dollar liquidity.

Any move towards yuan-based oil sales would also be closely watched by China, which has spent years seeking to expand the international use of its currency. Even limited use of the yuan in Gulf oil sales would likely intensify discussion about “de-dollarisation” and the future role of the dollar in global energy trade.