Iran Banking System at Risk as US Targets Chinese Institutions

Scotiabank's Derek Holt warns that the next Iran shock could hit the banking system, not just oil supplies. The market has focused on tankers and trading companies, but the real risk lies in the financial system that allows Iranian crude to reach its buyers.

China is at the center of this network as it purchases most of Iran's oil exports. Washington's next move could involve targeting larger Chinese financial institutions, restricting their access to funding and correspondent banking.

This would be a major escalation, risking retaliation from Beijing and accelerating China's efforts to reduce its dependence on SWIFT and dollar-based financial infrastructure.

Scotiabank identifies several possible avenues for this approach, including measures against Iranian holdings of crypto assets, gold, real estate, and foreign accounts, as well as sanctions against ports facilitating trade involving vessels that have called at Iranian ports.