Leverage has limits

Iraq sold oil in euros, Libya flirted with monetary alternatives, Iran sought non-dollar settlements – and punishment followed.

Neat.

Too neat.Oil mattered to the rise of the dollar system, but it never explained the whole system.

The dollar still accounted for 57.13% of disclosed global forex reserves in the first quarter of 2026, according to IMF.The Federal Reserve points to deeper reasons: large and liquid financial markets, safe assets, convertibility, institutional credibility and network effects.

Thus, the dollar is not about to disappear because some oil is paid for in yuan, rupees or roubles.

The real issue is how monetary power is used.When so much global finance touches American institutions, sanctions become exceptionally potent.

That can be useful.

It can also be overused.

The more the US turns access to the dollar system into a geopolitical weapon, the more incentive others have to create alternatives.That is why local-currency settlement, alternative payment channels and reserve diversification matter.

They are not yet a replacement for the dollar.

They are insurance against dependence on one centre of power.The latest Middle Eastern development makes the point better than another BRICS declaration.Saudi Arabia has asked China to help restrain Yemen's Iran-backed Houthis after their advance put greater pressure on shipping around Bab el-Mandeb.

Beijing then pressed Tehran privately.

China buys most of Iran's seaborne oil, but it also has huge commercial and energy interests in Saudi Arabia and the wider Gulf.