2 years ago, Saudi Arabia quietly canceled the ‘petrodollar’ deal with America that wired the world economy for 50 years. Then war broke out in Iran

The gold standard may have ended in the early 1970s, but something else quietly took its place for the next 50 years: oil. The so-called  “petrodollar” system wasn’t well understood for most of this time, but a secret deal between Henry Kissinger and Saudi Arabia ensured the dollar would remain the dominant reserve currency. The outbreak of war in Iran is exposing America’s Achilles’ heel, though, as China positions the “petroyuan” as the obvious successor, and to top it all off, the Saudis quietly killed the petrodollar two years ago. 

U.S. and Israel’s war on Iran has put a spotlight on the strength of the “petrodollar,” which makes up the cornerstone of America’s dominance over global trade, but economists warn the currency architecture has been eroding at its edges for years now.

Analysts are heralding the 2020s as marking the biggest change in the world’s relationship to the dollar since 1974, and every day the Iran war continues, the cracks in the old system grow wider and wider. To be sure, the dollar is still overwhelmingly dominant, but it’s no longer the only game in town. 

To understand this moment requires rewinding a bit to see how we got here.

Kissinger’s secret trip 

In 1974, the U.S. negotiated a deal with Saudi Arabia in which the Gulf country agreed to sell oil in U.S. dollars a...