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→Impact of the Iran war and closure of Hormuz Strait
===Impact of the [[Iran war]] and closure of [[Hormuz Strait]]===
===Impact of the [[Iran war]] and closure of [[Hormuz Strait]]===
The petrodollar system became essentially a protection racket for the large oil-producing countries in the [[Middle East]] aligned with the [[US]], such as [[Saudi Arabia]], [[Kuwait]], the [[United Arab Emirates]] (UAE), [[Bahrain]], and [[Qatar]]. The US [[military]] supposedly granted "[[security guarantee]]s to these countries in exchange for their agreement to denominate oil sales in [[US dollar]]s and recycle the proceeds into the [[US Treasury]] [[market]] to finance the US [[federal government]] [[budget deficit]], thereby creating [[demand]] the US dollar and helping keep [[interest rate]]s lower than they otherwise would be.
The petrodollar system became essentially a protection racket for the large oil-producing countries in the [[Middle East]] aligned with the [[US]], such as [[Saudi Arabia]], [[Kuwait]], the [[United Arab Emirates]] (UAE), [[Bahrain]], and [[Qatar]]. The US [[military]] supposedly granted "[[security guarantee]]s" to these countries in exchange for their agreement to denominate oil sales in [[US dollar]]s and recycle the dollars into the [[US Treasury]] [[market]] to finance the US [[federal government]] [[budget deficit]], thereby creating [[demand]] for the US dollar outside the [[United States]] and helping keep [[interest rate]]s lower than they otherwise would be. Ant country that needed Persian Gulf oil needed US dollars to buy the oil.
The petrodollar system was a massive prop for the US dollar ever since [[Nixon]] severed the dollar's last link to gold in 1971. As a US ally, [[Iran]] was originally intended to be a major buyer of US Treasury debt in the petrodollar system before the [[1979 Islamic Revolution]]. A break in [[diplomatic]] relations and the imposition of [[economic sanctions]] made a disproportionate reliance on the weaker [[Gulf States]] more imperative.
The petrodollar system was a massive prop for the US dollar ever since [[Nixon]] severed the dollar's last link to gold in 1971. As a US ally, [[Iran]] was originally intended to be a major buyer of US Treasury debt in the petrodollar system before the [[1979 Islamic Revolution]]. A break in [[diplomatic]] relations and the imposition of [[economic sanctions]] made a disproportionate reliance on the weaker [[Gulf States]] more imperative.