Over the last few months, global geopolitics around oil has started shifting dramatically. What we may be witnessing is the emergence of a new global energy and monetary order, where oil, shipping routes, and currency dominance are becoming central strategic tools.
Let’s start by looking at what has happened since late 2025.
-–
1. The Three Major Oil Powers Challenging the Dollar
For the past few years, three countries with massive oil reserves have been actively pushing alternatives to the petrodollar system:
Russia
Iran
Venezuela
These countries have increasingly experimented with selling oil in local currencies or non-dollar settlement systems, which directly challenges the traditional petrodollar framework.
If such a system expands globally, it weakens the structural demand for the US dollar, which has historically been reinforced by global oil trade being denominated in dollars.
-–
2. The “Shadow Fleet” – The Lifeline of Sanctioned Oil
Even under sanctions, these countries continued exporting oil through what is commonly known as the “shadow fleet.”
These are:
Older tankers
Often reflagged under different countries
Operating with opaque ownership structures
This fleet became the primary mechanism to move sanctioned crude from Russia, Iran, and Venezuela to buyers such as India, China and other emerging economies.
However, starting late 2025 and early 2026, Western countries began physically seizing vessels linked to sanctioned oil exports, signaling a shift from paper sanctions to direct enforcement at sea.
This marked a significant escalation in the economic battle around oil flows.
-–
3. Neutralizing the First Threat: Russia
Russia had become one of the largest suppliers of discounted crude after the Ukraine war.
However, pressure from sanctions, tanker seizures, and diplomatic pressure on buyers started restricting the flow of Russian oil through the shadow fleet.
Some major buyers, including India, began gradually reducing purchases of discounted Russian crude amid rising geopolitical pressure.
This weakened one of the major pillars supporting the alternative non-dollar oil trade.
-–
4. Venezuela: The Second Front
Venezuela holds some of the largest oil reserves in the world, but sanctions had already constrained its exports.
The US has also moved to intercept vessels linked to Venezuelan oil exports, tightening enforcement around sanctioned energy flows, therefore reducing unsanctioned oil flow from Venezuela.
This again reduced another potential supply base for non-dollar oil trade.
-–
5. Iran: The Final Strategic Theatre
That leaves the third major player — Iran.
Iran sits at the center of one of the most critical oil chokepoints in the world: the Strait of Hormuz.
This narrow shipping route handles roughly 20% of global oil supply passing from the Persian Gulf to international markets.
Recent military escalation between the US-Israel alliance and Iran has pushed the region into a severe crisis.
Iran has threatened to block the Strait of Hormuz and warned that vessels attempting to cross it could be attacked. A prolonged period of tension or disruption around this chokepoint could significantly strain global supply chains while simultaneously supporting higher oil prices—an environment that may benefit higher-cost producers such as the U.S. oil and gas industry.
As a result:
Oil prices have surged sharply
Shipping traffic has dropped
Tankers are waiting outside the Gulf
Insurance costs have exploded
Crude oil has already jumped to its highest level since 2023, with analysts warning prices could cross $100 per barrel if disruption continues.
-–
6. The Strategic Oil Price Problem
One interesting puzzle emerges here.
Despite sanctions on Russia, Venezuela and Iran, oil prices had remained relatively subdued for much of the past year.
For a country like the United States, which has become the world’s largest oil producer, this creates a challenge.
US shale production is relatively expensive, with estimated break-even costs often ranging between $40–$60 per barrel depending on the basin and operator.
Meanwhile, Middle Eastern producers have significantly lower extraction costs.
This means that if oil prices remain structurally low, the profitability of US production declines.
-–
7. The Strait of Hormuz – The Ultimate Chokepoint
Unlike sanctions, the Strait of Hormuz directly affects physical oil supply routes.
If shipping through this route is disrupted:
Gulf oil exports fall
Insurance premiums surge
Tanker freight rates spike
Global supply chains are forced to reroute
Even the fear of disruption can push prices higher because markets immediately price in supply risk.
This is precisely what we are seeing now.
-–
8. The Potential Strategic Outcome
If oil prices stabilize at a higher range for a prolonged period, several structural shifts could happen:
1. Higher oil prices improve the profitability and competitiveness of US oil production, while simultaneously helping keep the growing challenge to the petrodollar system — through local currency oil trade — under control.
2. Importers diversify supply chains away from unstable regions
3. Countries like India may increase imports from the United States despite longer shipping routes
4. The global oil trade may move back toward more regulated and transparent supply channels
However, this would come at a cost.
-–
9. The Inflationary Impact
Higher oil prices directly translate into higher global inflation because energy affects:
Transport
Manufacturing
Fertilizers
Logistics
Electricity generation
For countries like India that rely heavily on imported crude, sustained higher oil prices could lead to imported inflation.
-–
10. The Possible New Market Regime
If this geopolitical environment persists, global markets may be entering a new phase characterized by:
Structurally higher oil prices — where, after an initial spike, crude stabilizes at a base meaningfully higher than the trading range seen over the past 3–4 years.
elevated geopolitical risk premiums
persistent inflation pressures
more fragmented global trade routes
In other words:
Welcome to the new world order — one where energy security, currency dominance, and geopolitics are deeply intertwined.