UAE mulls shifting to Chinese yuan from US dollar for oil payments as Iran conflict deepens: report

UAE’s exploration of alternative currencies and financial safeguards highlights the broader impact of geopolitical tensions on global energy markets and financial systems

PGurus Newsdesk

April 20, 2026

Talks held with US officials over potential currency swap line

Move could challenge dollar dominance in global energy trade

The United Arab Emirates is exploring options to safeguard its economy amid escalating tensions with Iran, including the possibility of conducting oil transactions in alternative currencies such as the Chinese yuan, according to a report.

During meetings in Washington, D.C. last week, UAE Central Bank Governor Khaled Mohamed Balama discussed the idea of a potential financial safety net with US Treasury Secretary Scott Bessent and officials from the US Treasury and the Federal Reserve.

Talks on financial safety net

According to officials, the UAE raised the possibility of establishing a currency swap line as a precautionary measure in case the conflict in the Persian Gulf worsens.

While the UAE economy has so far avoided major fallout, authorities indicated that additional support may be required if financial conditions deteriorate or investor confidence weakens.

Concerns over dollar reliance

The discussions reflect growing concern that disruptions to oil and gas infrastructure and tanker movements through the Strait of Hormuz could impact dollar-denominated revenues.

Officials suggested that in a scenario of tightening dollar liquidity, the UAE may consider settling oil transactions in alternative currencies, including the Chinese yuan.

Such a move, if implemented, could pose a challenge to the dominance of the US dollar in global energy trade.

Uncertainty over approval

However, approval for a currency swap line remains uncertain. Such arrangements are typically managed by the Federal Reserve and are generally reserved for economies facing severe funding stress with broader implications for the US financial system.

The Federal Reserve currently maintains standing swap lines with major economies such as the United Kingdom, Canada, Japan, Switzerland, and the European Union.

Temporary facilities have also been extended in the past to countries like Mexico, South Korea, and Brazil during periods of financial stress.

Compared to these economies, the UAE has relatively limited financial linkages with US markets, which could reduce the likelihood of such support being approved.

Alternative mechanisms explored

The report also noted that the US Treasury has been exploring alternative financial mechanisms outside the Federal Reserve framework, including a $20 billion swap arrangement for Argentina through the Exchange Stabilisation Fund.

Strategic implications

The UAE’s exploration of alternative currencies and financial safeguards highlights the broader impact of geopolitical tensions on global energy markets and financial systems.

As uncertainty persists in the region, such moves could signal a gradual shift in how energy trade is conducted globally.

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