The economic fallout of the Iran war could mark the beginning of the end for petrodollar dominance, according to one Deutsche strategist. The U.S. dollar retains its status as the world’s reserve currency as most oil is priced and invoiced in the greenback. But the Iran conflict could see that dominance eroded if countries decide to price crude in other currencies, Deutsche FX strategist Mallika Sachdeva wrote in a research note published Tuesday. Crucially, she wrote that the war could be remembered as a key catalyst for “erosion in petrodollar dominance, and the beginnings of the petroyuan”. While many of the factors influencing the hegemony of the petrodollar were in place before the conflict, the aftermath could have several implications for the greenback – namely, a breakdown in the “security-for-oil-pricing” arrangement that has been upheld for over 50 years. The original terms agreed by the U.S. and Saudi Arabia in 1974 ensured the Gulf state would price its oil exports in dollars and invest oil surpluses into Treasurys, in return for security guarantees and military protection. But the U.S. security umbrella has been tested, with Gulf economies facing attacks on US bases, oil fields and infrastructure. Deutsche sees this as a catalyst for a potential unwind in Gulf dollar savings. Sachdeva also flagged the possibility of reduced demand for non-renewable energy in the future as countries ramp-up investment in renewables. “A world that becomes more self-sufficient in defence and energy would also be a world that holds less USD reserves,” she said. What is the alternative? Deutsche cited media reports that Iran is negotiating with other countries to allow ships through the Strait of Hormuz if oil payments are paid in yuan. While this move is largely speculative at present, the strategic importance of the Middle East to the dollar’s role as the world’s reserve currency should not be underestimated, according to Deutsche. “The current conflict may be the perfect storm for the petrodollar,” Sachdeva added.