Petrodollar

War on Iran could be 'catalyst' for erosion of US petrodollar, Deutsche Bank says

📰 The US-Israeli war on Iran could usher in the end of the petrodollar, a key pillar of the US’s financial heft in the world, according to a new report by Deutsche Bank.

"The huge strategic importance of the Middle East to the dollar's role as the world's reserve currency should not be underestimated. The current conflict could test the foundations of the petrodollar regime,” Deutsche Bank researcher Mallika Sachdeva wrote in a special report this week.

The petrodollar was born out of an agreement between the US and Gulf states, under which the latter sells their oil to customers across the globe in US dollars and, in return, reinvests those proceeds in the US.

The most common way Gulf states do this is by buying US Treasuries, which generally helps keep interest rates lower. That allows Americans and the US government to borrow more cheaply than their peers.

🔗 https://www.middleeasteye.net/news/war-iran-could-be-catalyst-erosion-us-petrodollar-deutsche-bank-says