The Iran Crisis Could Accelerate RMB’s Internationalisation. Asian Allies Unlikely to Back Trump.

Following US-Israeli strikes against Iran, Tehran has threatened to attack vessels passing through the Strait of Hormuz, through which roughly 20% of global oil and liquefied gas flows in normal times. The threat has pushed oil prices upward and raised concerns about global supply chains. Most of these fossil fuel shipments are bound for Asia, particularly China, India, Japan and South Korea. An Iranian official has suggested that Tehran is considering allowing limited oil tanker passage through the strait if oil is traded in Chinese yuan (RMB) instead of US dollars. Such a move could unintentionally accelerate the internationalisation of the RMB.

Since the start of the Iran conflict, marine traffic data reveals that commercial vessels navigating the Strait of Hormuz and Persian Gulf have increasingly declared Chinese affiliations to mitigate the risk of attack. As members of the "CRINK" alliance (or "Axis of Evil 2.0"), Iran and China are clearly strategic partners. Despite U.S. sanctions, China has purchased Iranian oil using Yuan since 2012, reportedly funneling the currency to Iran via Russian banks. 

Iran Crisis Could Accelerate Yuan’s Internationalisation

In fact, China is actively promoting the Yuan as an international rival to the dollar, establishing new offshore trading centers in London and Hong Kong. In February, the Chinese journal Qiushi republished 2024 remarks by China’s Xi Jinping urging the Yuan’s rise as a global reserve currency. This signals Beijing's renewed push to challenge the international financial status quo.

The strategy is already yielding results. Brazil, having established a local currency settlement pact in 2023, now utilizes a 190-billion-yuan swap agreement to stabilize trade. Consequently, by early 2025, renminbi settlement for major Brazilian exports like soy and oil reached 41%. 

Apparently, Iran's potential conditional offer does not just open the passage, but also opens China’s window of Yuan expansion. The offer could encourage others to abandon the petrodollar system. 

Asian Powers Unlikely to fight America’s Middle East war.

In an effort to assemble an Asian coalition, Trump called on nations including China, South Korea, and Japan to deploy warships to the Strait of Hormuz. Despite this push, the prospect remains unlikely due to deep-seated regional constraints.

Historically, Japan stands as the only Asian power to have engaged in, and been defeated during a World War. Under current legal frameworks, the Japan Self-Defense Forces are restricted from deploying troops unless the nation faces an immediate existential threat. Furthermore, Japan is currently preoccupied with significant domestic reforms, making any involvement in such a maritime conflict highly improbable.

South Korea is unlikely to support these maritime efforts, as President Lee Jae-myung has voiced frustration over Washington’s unilateral military movements at Osan Air Base. The sighting of heavy transport aircraft—typically used to relocate Patriot and THAAD systems to the Middle East—has signaled that Seoul is unwilling to simply follow U.S. orders at the expense of its own security.

Despite the military superiority of the South Korean-U.S. alliance, Seoul remains wary of depleting its defenses while Kim Jong Un continues to label the South his “most hostile entity.” This growing friction suggests that South Korea will prioritize its own sovereignty and peninsula stability over participating in a U.S.-led coalition abroad.