Throughout the entire month of July 2026, the US received zero crude oil shipments from Saudi Arabia for the first time since 1985. The war with Iran, launched to strengthen the petrodollar system, has produced the opposite effect - it is undermining the very foundation of American financial power.

War Continues and Blockades Tighten

By August 9, 2026, there was no end in sight for the US-Iran war, as Iran maintained the closure of the Strait of Hormuz, while its Yemeni ally, the Houthis, bombed Saudi oil infrastructure in Jazan, and blockaded the kingdom’s oil export from the Red Sea. Consequently, the Middle East’s crude oil exports, which enabled the US to maintain a financial empire through the petrodollar system, are likely to be restricted for the foreseeable future with significant economic consequences for Washington.

This occurrence is among the few times in which Washington’s reckless military adventures have resulted in adverse effects at home. The ongoing US war on Iran, fought ostensibly on behalf of Israel, is producing dynamics that undermine Washington’s stranglehold on the Middle East’s resources, especially the petrodollar system, which has been the basis of US global power since the early 1970s.

The petrodollar agreement, officially the US-Saudi Arabia Joint Commission on Economic Collaboration signed in June 1974, mandated the Arabian country to sell its oil in US dollars, and also buy US Treasury instruments, facilitating recycling of the then expanding Saudi oil wealth into the US financial system. Saudi Arabia was promised, among other things, protection, which was to occur in US military presence, many layers of defense agreements, and endless purchases of expensive US weapons, which are now proven inadequate and ineffective.

This arrangement created permanent demand for the US dollar, loosely meaning that the US dollar, which had exited the gold standard, was now backed by the vibrant oil trade. It also enabled US banks to earn a margin from trade between other nations, while the US was able to borrow cheaply and maintain a large trade deficit, which will progressively become impossible if the US war on Iran continues.

Losing the Dollar is Equivalent to Losing a War – Trump

The US war on Iran has so far brought results that Washington has never experienced, arguably in its existence. While most of Washington’s wars, such as in Afghanistan, Iraq, and Syria, gave it positive economic results, including access to minerals, crude oil, and control of revenues from the export of these resources, the war on Iran has restricted Washington’s control of the Middle East’s crude oil trade.

For instance, the 2003 US-UK invasion of Iraq on a false pretext gave both aggressors access to the country’s crude oil, enabling Washington to control revenues from Iraq’s sale of crude oil, which are to date channelled to an account in the Federal Reserve Bank in New York. Washington still controls the expenditure of these funds and restricts Iraqis from importing energy such as electricity and natural gas from Iran.

In September 2024, Donald Trump, then a Republican frontrunner in the presidential election, expressed fears of the US losing the dollar as a “global standard,” which he thought would be as disastrous as losing a war and could degrade his country to third-world status. As of August, 2026, it is safe to argue that the US is on course to lose both the dollar’s global standard status and a war, becoming a third-world country, if Trump’s predictions are anything to go by.

The interruption of oil trade through the Strait of Hormuz and the Red Sea, as seen earlier, means that the US dollar might no longer be backed by the Middle East’s crude oil trade. Importantly, the US Strategic Petroleum Reserve (SPR) is significantly depleted, reducing the possibility it can be used to further buoy the dollar. The adverse effects of excessive supply of dollars in the global markets, which are no longer demanded at the prewar levels, will surface and worsen over time in the US.

Meanwhile, Washington’s ability to use the military to reinforce the petrodollar is becoming complicated. Notable opinion leaders in the West have already described the US adventure in Iran as a loss, some describing it as a bigger strategic beating than Vietnam was, partly because the US is unable to bail out and embark on bludgeoning another oil-rich country.

A warning associated with General Alexus Grynkewich, the commander of the US European Command from late July 2026, was that he was unable to protect Israel from Iranian attacks while defending the US homeland due to limited navy destroyers. This warning gives a glimpse into Washington’s strategic limitations in using its military to control crude oil in the Middle East. Grynkewich’s “Israel” refers to a projection of the US geopolitical and geo-economic interest in the region.

Overseas Outpost in the Middle East

Israel, as used by Grynkewich, Joe Biden, and R.F. Kennedy, means Washington’s a settler colony with a name and sham leadership. In 1986, Biden, then a US senator, stated that the then $3 billion annual US allocation to Israel was the best investment since the recipient country was a creation of US interest in the region. Biden, as the president in 2023, reiterated a similar view. Similarly, in an interview in 2023, Kennedy stated that Israel constitutes a US presence (Bulwark) in the Middle East, as it enables Washington to protect access to resources, including oil.

He added the usual scaremongering that without Israel, the oil resources belonging to sovereign countries in the Middle East would be controlled by China and Russia. Therefore, from the views of Grynkewich, Biden, and Kennedy, among others, one can even argue that the US war against Iran was initiated to expand Washington’s control over the region’s oil and strengthen the petrodollar.

The explanation that the war was supposed to protect Israel was a deception. The same war crafted to expand the US’s control of Middle Eastern oil - taking Iranian crude, pricing it in dollars, and routing its payment through an account in the US Federal Reserve Bank, as in the case of Iraq - has produced opposite effects.

No Free Resources

Washington’s plan to steal Iran’s oil could have greatly boosted the petrodollar system and automatically added Iranians’ resources to the US Gross National Income (GNI). Some of the restricted crude oil exports from the Persian Gulf were already a component of US GNI, or were priced in US dollars, propping up the petrodollar empire. However, after only a few months of conflict, the US has not only failed to gain Iranian resources but has also lost control of the flow of resources from Iraq and other dollar-priced crude due to the closure of the Strait of Hormuz and the blockade in the Red Sea.

If the status quo persists for some time, the US financial empire will suffer a serious blow. Despite public statements made by Donald Trump showing bravado, forces in Washington are scrambling for other ways of propping up the dollar as an international payment system or preparing how to live with stricter access to low-cost borrowing at a time when the US public debt has reached 40 trillion.

Simon Chege Ndiritu is a political observer and research analyst from Africa. Courtesy

https://journal-neo.su/2026/08/12/the-dollar-without-petro-dual-hormuz-red-sea-blockade-cuts-saudi-us-crude-oil-exports-to-zero/