I believe the basic reason is pretty simple. Money.

Since 1971 OPEC has traded oil in U.S. dollars. So any nation that buys oil has to have large reserves of our currency. As a side effect, since all developed nations have these reserves already, it is simpler to use the dollar as basis for other trade as well. Which requires them all to have even larger reserves. That is why the dollar is the dominant world currency. It is also one of the primary reasons other countries are willing to buy our "we need some cash, hey, let's print more" debt.

Iraq, which has the 2nd or 3rd largest oil reserves in the world, began trading in Euros in 1999. Iran and someone else, I think Venezuela, started talking about switching also.

I'm no financial expert, but can you imagine what would happen to the dollar and the US economy if the dollar were no longer the dominant currency? The currency market would be flooded with nations getting rid of their massive dollar reserves. It would be much harder to sell our debt. The dollar would tank. It would not be pretty.

The answer? Go to war with Iraq and make them trade oil in dollars again. Nip that Euro idea right in the bud. Problem solved ... for now at least.