Testing the Efficacy of Renminbi Internationalization Amid the Hormuz Crisis: Tasks for the Financial and Insurance Industries

Executive Summary

Following the US-Israeli airstrikes on Iran in February 2026, transit volume through the Strait of Hormuz plummeted from 90 vessels per day to around 4, and the Iran-Oman agreement to divide control over the strait has yet to reach full normalization, hampered by hardline pushback and resistance to the toll-fee scheme. Amid this phase, an expansion of renminbi settlement by Iran has been observed, but this stems not from a strengthening of the competitiveness of China's financial system but from the absence of alternatives for a state excluded from the dollar settlement network. As long as the structure in which US sanctions and insurance clauses obstruct the actual execution of renminbi settlement persists, renminbi internationalization is likely to remain a limited workaround rather than lead to a structural shift in the monetary order. Under the baseline scenario, assessed at a 55% probability, a partial and unstable resumption of transit is expected to continue, with renminbi settlement expanding gradually but without any qualitative transformation. Korea's financial and insurance industries need to strengthen their underwriting review systems for insurance related to Iran-controlled shipping lanes and their checks on sanctions exposure, while also establishing exceptional operational procedures for responding to renminbi settlement demands, so as to manage the risks of both overreaction and underreaction.

I. Issue Situation Analysis

The Limits of China's Renminbi Internationalization Efforts Exposed Amid the Hormuz Crisis

1. Background and Development of the Issue

Full-scale war broke out in the Middle East in late February 2026 when the United States and Israel launched airstrikes on Iran[7]. In response, Iran effectively blockaded the Strait of Hormuz[13]. Before the war, this strait had been the passage through which roughly one-fifth of the world's oil supply transited[7]. A ceasefire was achieved briefly in April, but it soon collapsed as attacks in the strait continued[13].

Iran subsequently put forward a plan to impose tolls on transiting vessels[13]. It also stated that vessels bypassing the shipping lanes it designated would be treated as targets for attack[13]. According to IMF PortWatch data, for the week ending August 2, the average number of vessels passing through the strait per day was only 4. This represents a sharp decline compared to 90 vessels during the same week in 2025[10]. Transit volume also fell from 3.5 million tons per day to approximately 143,000 tons[10].

At this juncture, the Carnegie Endowment for International Peace noted that attention has focused on China's 'financial powerhouse' initiative, particularly its attempts to expand renminbi influence in energy markets[3]. Chinese financial institutions have spent years building renminbi settlement channels targeting energy-exporting countries[3]. The People's Bank of China has likewise established currency swap lines with the monetary authorities of these countries[3]. Iran's expanded use of the renminbi is connected to this broader trend.

2. Current Situation

Beginning in August, reports have continued to suggest that Iran and Oman are close to an agreement on dividing control over the strait[4][12]. Discussions have centered on an arrangement in which vessels enter the Gulf via an Iran-controlled shipping lane and exit via an Oman-controlled one[4]. However, on the 6th, Iran stated that while an agreement with Oman was close, this alone would not be sufficient to open the strait[12]. The United Arab Emirates claimed on the 6th that Iran had attacked its vessels again[12].

Molbagher Zolghadr, secretary of Iran's Supreme National Security Council, demanded as preconditions for opening the strait the complete termination of the war by the United States, the lifting of the naval blockade, troop withdrawal, the total lifting of sanctions, the return of frozen assets, and the payment of war reparations[13]. This amounts to demands equivalent to negotiations over settling the war itself, rather than a simple resumption of trade. The Wall Street Journal reported that the Iranian negotiating delegation is under pressure from domestic hardliners[1]. Arab mediators have questioned whether Iranian diplomats possess the political power to guarantee implementation even if an agreement is reached[1].

Opposition to the toll-fee scheme itself is also fierce. The UAE outlet The National, citing maritime law experts, reported that Iran's imposition of tolls could "totally shatter" the principle of freedom of navigation[9]. Concerns have also been raised that a toll precedent could spread to other maritime chokepoints[9]. A Cypriot outlet reported, citing shipping industry sources, that the Iran-Oman agreement concept is difficult to operationalize in practice due to constraints from US sanctions and insurance clauses[14]. In other words, the settlement itself is structurally caught up in the sanctions net.

Amid this, US Treasury Secretary Scott Bessent maintained an optimistic tone in a CNBC interview, suggesting that an agreement was imminent[8]. However, a new attack incident in the strait has cast a shadow over the negotiations, with the toll dispute complicating matters[8].

3. Key Actors and Positions

Iranis leveraging its authority to impose tolls as negotiating leverage. Al Jazeera assessed that Iran's control over trade is a potent economic weapon, but one with an expiry date[10]. Another variable is the narrowing latitude of the negotiating delegation due to constraints imposed by domestic hardliners[1].

The United Statesis in a position where it is difficult to accept Iran's demands for a complete lifting of sanctions and troop withdrawal. The gap between Treasury Secretary Bessent's optimistic remarks and the actual deadlock in negotiations reflects this[8].

Chinais maintaining a cautious stance behind the surface phenomenon of Iran's expanding renminbi settlement. According to EAI's analysis, China itself is also an affected party that relies on the Strait of Hormuz for a significant portion of its oil imports, and it has maintained a cautious attitude toward strategic closeness with Iran[2]. The Carnegie Endowment for International Peace assessed that "the immaturity of parts of China's financial system and its continued dependence on the dollar still constrain the renminbi's geoeconomic influence," while adding that "recent developments could trigger policy moves aimed at changing this structure"[3].

Omanis playing the role of the substantive mediator between Iran and the United States. The scheme for dividing control is close to a compromise proposal put forward by Oman[4].

Gulf oil-producing states and the shipping industryare exposed to a dual risk of toll precedent-setting and insurance/settlement risk. The UAE has publicly raised the issue of attacks on its own vessels, putting pressure on Iran[12].

4. Key Issues

The first issue is whether the imposition of tolls will become a precedent for the principle of freedom of navigation[9]. The second issue is whether the Iran-Oman agreement can coexist with the US sanctions regime[14]. The third issue is whether the expansion of renminbi settlement signifies a strengthening of the competitiveness of China's financial system, or is merely a stopgap measure for a country excluded from the dollar settlement network. EAI has characterized Iran's expanded renminbi settlement as "a phenomenon stemming not from the competitiveness of China's financial system but from the stopgap measures of a country excluded from the dollar settlement network," and assessed that "absent the conditions of a reserve currency, such as capital market openness and bond market liquidity, it is unlikely to lead to a change in the renminbi's status"[2]. Whether this diagnosis will be empirically verified over the next 12 months is a key point to watch.