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→Impact of the 2026 Iran war and closure of Hormuz Strait
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]] under the [[Shah]] was originally intended to be a major buyer of US Treasury debt in the petrodollar system. After the break in [[diplomatic]] relations and the imposition of [[economic sanctions]] as a result of the [[1979 Islamic Revolution]], it made more imperative a disproportionate reliance on the smaller [[Gulf States]] to buy US Treasury debt.
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]] under the [[Shah]] was originally intended to be a major buyer of US Treasury debt in the petrodollar system. After the break in [[diplomatic]] relations and the imposition of [[economic sanctions]] as a result of the [[1979 Islamic Revolution]], it made more imperative a disproportionate reliance on the smaller [[Gulf States]] to buy US Treasury debt.
[[File:Word-image-71917-2-768x495-1.png|center|650px|thumb|The closure of the [[Strait of Hormuz]] and destruction of [[oil]] [[infrastructure]] made it more difficult for the [[Gulf States]] to buy [[US]] [[Treasury]] [[debt]] and [[finance]] the [[US government]]'s [[federal deficit|bloated deficit]].]]
The [[Iran war]] became a stark illustration of the limits of US [[military]] power and its inability to provide the protection the oil-rich [[Persian Gulf]] [[Sunni]] [[Arab]] states believed they had. Iran has shown that it is the new sheriff in town and that US promises of protection are not only worthless but counterproductive, as the US presence makes them not only a target, and invites uncontrolled instability among their majority [[Shi'ite]] [[population]]s. With the [[Hormuz Strait]] closed and oil [[infrastructure]] damaged, far less of their oil was being sold and, therefore, far less is being recycled back into the US [[T-bills]] and [[Treasury bond]]s to [[finance]] the US [[federal deficit]].
The [[Iran war]] became a stark illustration of the limits of US [[military]] power and its inability to provide the protection the oil-rich [[Persian Gulf]] [[Sunni]] [[Arab]] states believed they had. Iran has shown that it is the new sheriff in town and that US promises of protection are not only worthless but counterproductive, as the US presence makes them not only a target, and invites uncontrolled instability among their majority [[Shi'ite]] [[population]]s. With the [[Hormuz Strait]] closed and oil [[infrastructure]] damaged, far less of their oil was being sold and, therefore, far less is being recycled back into the US [[T-bills]] and [[Treasury bond]]s to [[finance]] the US [[federal deficit]].