Just now! The US dollar's dominance in the Strait of Hormuz has been broken, Iran is pricing oil transit fees in $BTC, and the global financial order is experiencing a "nuclear-level" reshuffle!

The tensions in the Strait of Hormuz are exposing a crack in America’s most core geopolitical tool. Using the dollar as a weapon is least effective against the most suppressed opponents, and an overused sanctions system is now amplifying the adversaries’ strength.

Recent market dynamics provide a footnote. After news of a two-week ceasefire between the U.S. and Iran, risk aversion cooled, putting pressure on the dollar index. The ICE dollar index once plummeted 1.2%, erasing all its gains for the year. The Bloomberg dollar spot index also declined 0.8%, marking its worst single-day performance since January this year.

What’s more noteworthy is a report that Iranian officials plan to require shipping companies to pay transit fees in cryptocurrency, with a standard of $1 per barrel of oil transported. Previously, according to Lloyd’s Intelligence data, some commercial ships paid up to $2 million to Iran to ensure safe passage through the strait.

Analyst Daniel Davies sees Iran’s move toward crypto pricing as a sign that the dollar sanctions system is facing structural challenges. When a sanctioned country can bypass dollar clearing channels and influence the actual pricing of international shipping, the geopolitical deterrence supported by dollar hegemony is substantially weakened.

He quotes a central banker’s adage from the history of the Bank of England as a warning: “You can wave a big stick, but never really use it; it might break in your hand. Better to raise a finger in warning.” He believes the Hormuz crisis could mark a historical watershed — the dollar’s big stick is now in jeopardy.

The logic of sanctions failing can be traced back to 2022. At that time, Russia’s banks were sanctioned and cut off from the SWIFT system. Even then, the general consensus was that this was more “inconvenience” than “economic death sentence” for Russia. However, Russia’s ongoing war capabilities and crude oil exports continued, disappointing sanctions supporters.

Iran’s case is even more convincing. Iran is one of the few countries subject to nationwide sanctions by the U.S. Treasury, yet this has neither stopped its continued oil sales nor prevented it from charging “transit fees” to international ships passing through Hormuz. The existence of sanctions has not changed its actual operational capacity.

The root issue lies in a structural paradox. The deterrent power of dollar sanctions stems precisely from the convenience and profitability of the dollar-based economic system itself. This means the weapon is most lethal against open economies deeply integrated into global supply chains — and these countries are rarely the ones truly needing pressure.

Countries under long-term sanctions are quite different. They often adapt by “local sourcing” and building alternative bypass networks. Research shows a group of banks and shadow financial institutions willing to bear U.S. extraterritorial enforcement risks, providing laundering channels for dollar transactions. These counterparties are less dependent on access to the New York dollar clearing system.

Today, with increasingly diverse anonymous internet payment methods, these alternative channels are gradually becoming normalized. The U.S. finds it difficult to fully block virtual currency transactions or digital assets linked to real assets conducted via decentralized networks, making cross-border payments more covert.

More ironically, due to the U.S. imposing extremely cumbersome anti-money laundering compliance requirements on allies, this has inadvertently accelerated sanctions countries’ shift into regulatory vacuum zones.

He draws an analogy with OPEC’s history: since its founding, member countries have long known that providing users of their products with incentives to find alternatives is a very unwise strategy. The over-weaponization of the dollar system by the U.S. is repeating this mistake.

This trend has been predicted academically. He and political scientist Henry Farrell — who jointly proposed the concept of “weaponized interdependence” — have explicitly discussed this in a joint paper. It states: “As the U.S. continues to escalate pressure, other countries will seek to escape dollar dominance, which may in turn prompt the U.S. to escalate further.”

The core judgment is: when the dollar is over-weaponized, the global financial system shifts from being a geopolitical lever for the U.S. to an amplifier of its opponents’ power. The big stick can be waved, but when used, it might break.

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