New York, April 15 -- The war in Iran is spurring a fresh wave of enthusiasm over prospects for China's currency to more effectively rival the US dollar. Although still dwarfed by the greenback in international trade, the yuan saw an uptick in demand after Iran took control of the Strait of Hormuz and began accepting payments in China's currency to allow freighters to sail through safely. Even as the Trump administration began to blockade Iranian ports after peace talks collapsed over the weekend, the war more broadly has revived talk of a "petroyuan" - a concept President Xi Jinping advocated with little success on a 2022 trip to the Middle East. A Chinese government-affiliated scholar last week said the volume of yuan-denominated crude oil has picked up due to the conflict, while official media reported that the nation's Cross-Border Interbank Payment System (CIPS) recently recorded a single-day transaction record of 1.22 trillion yuan ($179 billion), surpassing the 1 trillion mark for the first time. Deutsche Bank AG strategist Mallika Sachdeva captured the sentiment in a recent note, saying the war "could be remembered as a key catalyst for erosion in petrodollar dominance, and the beginnings of the petroyuan." The German bank isn't alone in seeing the logic behind a shift to pricing oil in the currency of the world's largest crude importer. China's economic ties with the Middle East have steadily tightened, with Communist Party officials developing an oil-trading infrastructure in Shanghai that includes futures contracts. They've also expanded the CIPS system and have explored an international digital currency platform that includes Mideast partners. Yuan payments and receipts between China and the Middle East reached 1.1 trillion yuan in 2024, rising at an annual speed of 53% since 2020, according to latest official data. The majority of the transactions involved securities rather than goods, which made up just 18% of the total. "The Middle East conflicts will certainly increase the incentive to use renminbi in oil trade, especially in the developing world," said Chi Lo, senior Asia Pacific market strategist at BNP Paribas Asset Management. "But they will not prompt a paradigm shift, because there is no competitor that can replace the dollar for quite some time." The stakes are high. Crude oil accounts for a fifth of global trade denominated in the greenback, and a shift in its pricing and settlement could lead to a more fragmented picture that erodes the dollar's dominance in the global monetary system. A number of emerging economies are already looking to reduce their reliance on a currency increasingly weaponized by the US. Still, the long-term impact of the conflict on oil pricing will take time to discern - and many analysts remain skeptical about the yuan's ability to challenge the dollar anytime soon. US President Donald Trump's blockade of Iran's ports shows the formidable wall of ongoing challenges facing the "petroyuan," which would see the Chinese currency used widely in the global oil trade....