The global order at the crossroads

Almost six months have passed since the conflict between the US, Israel and Iran erupted. While these countries had exchanged fire before that, things have escalated sharply in late February 2026. The conflict also has expanded with several neighbouring Gulf nations becoming active participants, forming alliances to defend against Iranian strikes.

The conflict has alternated between heavy bombardment, negotiations, and tense standoffs after talks failed to deliver a resolution. This is likely the case for a while longer.

The world is on edge, watching what will unfold from here. Who will give in first? What is going to happen next? Will this descend into a deeper global conflict? Will the markets crash? And so on…

The global economy has stalled somewhat as the Iranian military and Houthi militia seek to exert control over two key naval chokepoints – the Strait of Hormuz and the Bab-el-Mandeb. By firing at vessels or merely threatening to do so, they have reduced the number of ships sailing through. As a result, the global economy has taken a hit after oil spiked from US$60-65 a barrel to trade as high as US$120 before falling to US$85 now.

Moreover, the IRGC has bombarded several key oil refineries and other infrastructure of its Gulf neighbours in an attempt to cripple the world’s supply of oil, petrochemicals, and fertilisers.

This conflict is dominating headlines as it remains one of, if not the most, concerning matters for the global economy. Regardless of one’s leanings or perspectives, what’s clear is that this conflict determines the direction of the global order – its structure, rules of engagement, and how to administer it.

We’re going to explore this further today. Our aim isn’t to predict who will win but to understand how we got here and identify some things that many observers have missed.

The petrodollar system turns 55

It’s been just over 55 years since the US President Richard Nixon ordered the decoupling of gold and the US dollar on 15^th August 1971. That ushered in the end of the Gold Standard. In its place was a 1974 deal between the US and Saudi Arabia to guarantee the US dollar as the currency for international oil trade.

This brought forth the petrodollar system.

The petrodollar system’s survival hinges on the number of participants willing to adhere to it. For many decades, countries used the SWIFT system to trade oil, which is essential to power our society. Several countries attempted to bypass the system. A few that did, including Iraq, Libya, and Russia, suffered devastating consequences. Others were expelled or faced crippling sanctions, including penalties or restricted trade with other nations.

However, after the subprime crisis in 2007-09, several nations including Brazil, Russia, India, China, and South Africa, began to collaborate to build an alternative trading bloc. This became known as BRICS. Many developing nations in the Middle East, Africa and South America started to align themselves more closely with this bloc. Gradually it appeared to become a potential rival to the SWIFT system.

The BRICS system offered an alternative for countries expelled or facing severe restrictions from the SWIFT system, including Iran, Russia, and Venezuela. They can sell their oil via back channels, often accepting significant discounts from the prevailing price. Since oil and gas are their major exports, their revenue from oil sales fell, dealing a punishing blow to their economies.

The SWIFT system is powerful in that it can dictate a country’s fate by excluding it from the system and crippling its economy. However, the system isn’t immune to the damage it inflicts. Especially with Iran and Russia, their expulsion reduced the amount of oil that circulated in the petrodollar system. Countries excluded from the system can bypass and even undermine it.

This is what happened for several years, until the start of this year.

The open contest between SWIFT and BRICS

For many years, the US and other nations overseeing the petrodollar system used expulsion as its ultimate weapon to ensure countries followed the rules. However, rising deficits and debt burdens of Western nations eroded its power. Not only that, Russia’s expulsion in 2022 after the Russia-Ukraine conflict revealed that the petrodollar system was more vulnerable than before. That became evident with the European Union’s reliance on Russian oil and gas, the Russian ruble’s quick recovery after the sanctions, and the global economy experiencing accelerating inflation in 2022.

The petrodollar system had weakened over the years and reached a point where commodity-rich countries could openly defy it and hasten its collapse. They can then move to BRICS to form an alternative bloc and compete against the petrodollar system.

The Trump administration returned to power in 2025 and identified this threat. It decided to change tactics to address this situation, leveraging its superior military and trade positions to revive the petrodollar.

The US kicked off the trade wars last April by imposing substantial tariffs on both its trading partners and adversaries. This would allow it to partially offset taxes on its domestic economy. This delivered mixed outcomes as other countries retaliated with their own tariffs.

The military phase began early this year with the US Delta Force launching a swift capture of Venezuelan President Nicolas Maduro and his wife. With Maduro’s removal, the Vice President Delcy Rodriguez succeeded as Acting President. While not an open regime change, this move shifted where Venezuelan oil flowed, not to China, but to the US.

Iran was next on target. After over two years of Israel and Iran exchanging missile and drone fire, plus the IRGC cracking down on its own civilians protesting over economic hardship, the US launched Operation Epic Fury in late February to disable the Iranian air and naval capabilities and the leadership. Many top-tier officials of the Iranian military and clerical leadership, including Ayatollah Ali Hosseini Khamenei, died in a series of targeted strikes.

The intense bombardment lasted around six weeks, with a ceasefire in early April that led to negotiations over the Strait of Hormuz. Talks that began in May resulted in a memorandum of understanding in June, which lapsed recently. During this period, the conflict has been on-again-off-again.

You’re probably familiar with the impact of this conflict on the global supply chain and broader economy. Also, you may have followed the changes in alliances inside the Middle East and beyond. However, I believe that many are missing the far-reaching impact of this conflict on the global order. It’s about controlling the oil to define the monetary system.

Iran may be a significant oil-producing nation. But more importantly, Iran can exert pressure on the transportation of up to a third of the world’s oil and gas, plus other cargo including petrochemicals, that pass through the Strait of Hormuz and the Bab-el-Mandeb. While its claim to own the Strait is disputable, its willingness to threaten safe passage suggests it has some control.

This was an unspoken arrangement imposed since 1979 and cemented in 2012 with Iran’s expulsion from the SWIFT system. Iran’s belligerence towards most of its Gulf neighbours places a risk premium on the global oil price. This benefits Iran by increasing its oil revenue. Higher oil prices spark inflation, which erodes the petrodollar system.

Lesson on foreign currency reserves

The US has adopted multiple steps to weaken Iran’s stranglehold, including military strikes to reduce its threat at the Strait, a naval blockade to cut off its trading routes, and diplomacy aimed at pressuring Iran’s allies to cut ties and dividing the IRGC and the civilian government factions. The Iranian regime has put up stubborn resistance, with the militant factions seizing more power and openly declaring they would try to outlast the Trump administration.

However, the Iranian economy is crumbling quickly. Though no one can guess how long this can prevail. The Iranian people are suffering, dividing society from within. It could possibly become the regime’s undoing as its own people become a greater threat than the enemies outside.

The US has dangled around US$100 billion worth of Iranian frozen assets as an incentive to resolve the conflict. In the first round of peace talks that led to a memorandum of understanding, the Trump administration offered to release part of the funds, US$24 billion, to the Iranian regime to provide relief to the economy. There was a condition, Iran would guarantee safe passage across the Strait over a 60-day period while talks would continue over a possible toll arrangement.

Many mistakenly interpreted this to be the Trump administration giving in early and the Iranian regime getting something without following through. We now know that didn’t happen. Instead, it seemed like the Trump administration sought to divide the hardliners and those in the regime who wanted the talks to progress. As of now, we can see the hardliners have gained the upper hand inside Iran. President Trump has suggested that any damages by Iran against the US and its allies may be paid by deducting these from the frozen assets.

Regardless of what unfolds, one thing is certain. The world is waking up more to the safety of their national reserves held in the US dollar or other currencies, for that matter. They realise that such holdings are only as safe as their counterparties or custodians are willing to honour the transaction. A dispute or pressure from another party that has power over the payment system can mean those reserves are no longer theirs.

For at least a while longer, the petrodollar system will prevail. The conflict has realigned many Gulf nations closer to the SWIFT system against Iran, who have endangered their economic interests and security. Therefore, banking on the collapse of the petrodollar system now is futile. It’s a popular moniker for precious metals enthusiasts, but one that doesn’t fit the current reality.

Even though I don’t see the petrodollar collapsing soon, it’s important to note that countries are reassessing which assets they will hold for their trade surpluses and reserve assets. That’s why central banks continue to increase their gold reserves, even as gold has fallen by almost 20% from its January peak. Therefore, it’s not a case of gold or the petrodollar, but both.

And at this point, let me return to discussing China. Being the world’s second largest economy, it has been working toward developing an alternative financial system with BRICS nations for over a decade. The Chinese Communist Party has long been aware that the SWIFT system is difficult to dislodge. It also needed to work within the system to build its economy. So it hedged its bets by holding both foreign currency reserves and gold.

However, the regime drew its line in the sand in late-2013. It declared that it would slow the accumulation of foreign currency reserves. The world’s biggest exporter shifted to transforming its trade surpluses into gold reserves. This is because it recognised that gold gives it more autonomy over foreign currencies, which thrives on trust and alliances that can change.

Data from the St Louis Federal Reserve showed that foreign currency reserves comprised 59% of China’s total reserves in 2016. It reduced to 25% in 2023 and is likely to have decreased further now. China has been protecting its wealth reserves by holding what it owns, rather than entrusting it to a counterparty or custodian whose alliances could shift.

This isn’t just a trend for China and countries hostile to the US and its allies. We should see in the coming years that even US allies increase their gold reserves.

If those who are running the world are doing this, you should pay attention. They see gold as something that gives them control of their wealth. When you can control your wealth, you have the power to define your own destiny. The conflict in the Middle East is a live demonstration of this. Many focus on the daily developments and the commentary from pundits without thinking about the implications for their own lives.

Over the years, especially recently, we’ve seen how governments, corporations, experts, and the media have betrayed our trust or proven themselves to serve their purposes ahead of yours. Whether it is the Federal Budget’s tax reforms, the countless corruption scandals surfacing from politicians and business leaders, or medical experts and academics who will say one thing publicly and remain silent when put under oath, you need to reconsider whether you will trust them or rely on yourself.

That’s why many have already acted to regain control of their wealth. You can join them.

Please click here for my presentation to learn about how precious metals assets can help you decouple from the system, protect your purchasing power, and build your wealth. You will also find out how to build your precious metals portfolio.

Act now for your family and future generations.

That’s it from me for today. Have a good weekend ahead!