Dalio posted: Final showdown! Everything depends on who controls the Strait of Hormuz.

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Ray Dalio, founder of Bridgewater Associates and a macro investor, has given a very clear judgment on the current Middle Eastern situation: The ultimate winner of this conflict will depend on who controls the Strait of Hormuz.

On March 16, in a long post on X, Dalio stated that this strait is not only the core node of geopolitical games, but may also become the "ultimate showdown" that determines the global power structure:

If Iran retains control over navigation through the Strait of Hormuz, or even just the ability to threaten to block the strait as a bargaining chip, the U.S. will be seen as having lost the war; while if the U.S. can ensure freedom of navigation in the strait and weaken Iran's threat, it will enhance its global leadership position.

The Strait of Hormuz is considered one of the world's most crucial energy transportation routes, with a large amount of Middle Eastern oil and natural gas passing through it to reach international markets. If the strait's passage is threatened, it would not only disrupt global energy supply, but could also quickly transmit shockwaves to financial markets, trade systems, and the geopolitical landscape. Dalio believes that because of this, the struggle for control over the strait may become the critical point that determines the outcome of the war.

Historical Experience: The Decline of Empires Often Begins With Key Passageways

More importantly, Dalio draws parallels between the current situation and turning points in the histories of several empires:

For example, after the Suez Canal crisis, Britain's global influence quickly waned. Similar situations occurred during the decline of Dutch and Spanish empires: When a dominant power shows an inability to maintain order in the competition for key trade passageways, global capital, allies, and political forces often quickly realign.

In the article, Dalio further proposes an important historical pattern: When a dominant country with global reserve currency status shows weakness simultaneously in fiscal, military, and political spheres, its allies and creditors often begin to lose confidence. This shift in confidence eventually reflects in financial markets, such as bond sell-offs, currency weakening, and rising gold prices.

Not Just War, But a Test of World Order

Dalio also pointed out that the current situation is not an isolated event, but part of a larger historical cycle. Over the past decades, the U.S. has gone through the Vietnam, Afghanistan, and Iraq wars, all of which have had lasting impacts fiscally, militarily, and geopolitically. If this Iran and Strait of Hormuz-related conflict evolves into another costly war, its cumulative effects may further weaken the post-WWII U.S.-led world order.

At the same time, he reminds us, the U.S. still holds enormous advantages in this game. If the U.S. can ensure the safe navigation of the Strait of Hormuz through military power and alliances, it will again demonstrate its ability to maintain international order and reinforce global confidence in the U.S. financial system and dollar assets.

In Dalio's view, this conflict over the Strait of Hormuz reaches far beyond the Middle East. The outcome will affect global trade and energy flows, might alter worldwide capital allocation, and trigger chain reactions in the geopolitical relationships of relevant countries.

Therefore, in Dalio's opinion, this potential "ultimate battle" is not only about the result of a war, but also about the future direction of the global financial system, dollar status, and world order.

Below is the full content posted by Dalio on X, translated by AI, with some omissions:

It All Comes Down to Who Controls the Strait of Hormuz: "The Final Battle"

Comparing what is happening now with similar historical situations, and cross-checking with smart and well-informed leaders and experts, has always helped me make better decisions. I find that most wars are full of huge disagreements about the future direction, and major, unexpected events.

However, in this Iran-related war, one thing is obvious and nearly universally agreed upon: It all depends on who controls the Strait of Hormuz.

I hear from senior government officials, geopolitical experts, and people worldwide that if Iran still holds the power to decide who can pass through the Strait of Hormuz, or even retains it as a bargaining chip, then:

1. The U.S. will be seen as having lost the war, and Iran will be seen as having won.

The reason is, if Iran can control the Strait of Hormuz and use it as a weapon, it will clearly show the U.S. is unable to resolve the situation.

If Iran is allowed to close the world's most important strait—a strait where freedom of navigation must be guaranteed, no matter the cost—the consequences will be hugely destructive to America, its regional allies (especially Gulf allies), countries highly dependent on strait oil transport, the world economy, and global order.

If Donald Trump and America don't win this war—whose victory metric is simple: Can they ensure free passage through the Strait of Hormuz.—they will be seen as having created a catastrophic situation they cannot resolve.

No matter the reason the U.S. ultimately fails to control the Strait of Hormuz—
whether anti-war politics before the upcoming midterm elections threatens Trump’s political position;
or because Trump and American voters are unwilling to pay the human and financial cost necessary to win;
or America lacks sufficient military power to obtain and maintain control of the strait;
or he cannot organize a coalition to keep the strait open—

None of these reasons matter.

President Trump and America will be viewed as losers.

Based on my study of history and judgment of the current situation, I believe, if America fails this way, losing control of the Strait of Hormuz could be like:The Suez Canal crisis of 1956 for Britain,Similar defeats of the Dutch Empire in the 18th century,and similar losses of the Spanish Empire in the 17th century.

The pattern before imperial collapse is nearly always the same.

While I explain this more fully in my book "Principles for Dealing with the Changing World Order," here I summarize: History is full of cases of a perceived weaker nation challenging the world’s dominant power over key trade passageways (like Egypt challenging Britain for control of the Suez Canal).

In these cases, the dominant power (like Britain) threatens the weaker side (like Egypt) to open the route. Then, the whole world closely watches the development and adjusts attitudes and capital flows accordingly.

This decisive "ultimate battle" reshapes history, because people and capital always quickly and naturally flow from losers to winners.

These shifts affect markets—especially bond, currency, and gold—and the layout of geopolitical power.

After studying so many cases, I have a principle:

When a dominant power with global reserve currency status overextends itself fiscally, and shows weakness in both military and financial control, beware of loss of confidence by allies and creditors, reserve currency status wobbles, debt asset sales, and depreciation of the currency—especially versus gold.

Because people, nations, and capital always rapidly gather to winners, if the U.S. and President Trump cannot control marine traffic through the Strait of Hormuz, it will threaten U.S. power in the world and the current world order.

Historically, the U.S. was assumed to be the dominant force, able to militarily and financially defeat opponents (especially mid-tier adversaries).

However:Vietnam WarAfghanistan WarIraq Warand possibly this war with Iran

These wars' cumulative impacts on military, finance, and geopolitics are not good news for America and for the sustainability of the U.S.-led world order since 1945.

On the contrary,

When the dominant power shows military and financial strength, confidence grows, and people are more willing to hold its debt and currency.

After Ronald Reagan became president, he made Iran release hostages immediately and, during the Iran-Iraq War when Iranian attacks threatened Gulf shipping, ordered the U.S. Navy to escort tankers. He demonstrated America’s power against Iran.

If President Trump can show the ability he promised—win the war by ensuring free passage through the Strait of Hormuz, eliminating Iran’s threat to neighbors and the world—it will greatly enhance confidence in him and U.S. power.

2. If the Strait of Hormuz remains under Iranian control

If the Strait of Hormuz remains in Iran's hands and is used to threaten U.S. Gulf allies and the global economy, everyone becomes Iran’s hostages.

In this scenario, Trump will be seen as having started but ultimately lost the conflict.

He will leave America's regional allies a big problem and lose credibility—especially considering previous remarks. For example, Trump has said:“If for any reason anyone lays mines in the strait and those mines are not immediately cleared, Iran will face unprecedented military consequences.”“We will easily destroy those easy targets, making it nearly impossible for Iran to rebuild as a nation—death, fire, and fury will descend upon them.”“Iran’s new leader must be approved by us, otherwise he won’t last long.”

I often hear senior decision-makers in other countries privately say similar things:

“He talks tough, but will he really fight and win when it gets difficult?”

Some observers are watching like Romans at a gladiator match, or sports fans before a final, eagerly awaiting the conflict.

President Trump is now calling on other countries to join the US in ensuring the free navigation of the Strait of Hormuz. Whether he can succeed in getting these countries involved will show his ability to build alliances and rally forces, so this will be an important victory.

Just relying on the U.S. and Israel to ensure shipping safety without depriving Iran of control of the strait will be extremely difficult, and will likely require a major war.

The outcome matters greatly for Iran's leadership and its most powerful population groups—it’s a matter of life and death existence.

For Iranians, the war is largely about revenge, and loyalty to values that matter more than life itself.

They are willing to die for it, because showing such a resolve is crucial for dignity and demonstrating faith—this piety is believed to bring the greatest rewards.

Meanwhile, Americans are worrying about gas prices, and U.S. leaders worry about midterms.

In war, a nation's capacity to endure pain is often more important than its ability to inflict pain.

Iran's plan is to prolong the war and gradually escalate, because it’s well known the U.S. public and leaders have little tolerance for prolonged war and suffering.

Thus, if the war is painful enough and lasts long enough, Americans may eventually quit fighting and abandon their Gulf "allies." Other allies will realize U.S. won't protect them in a crisis.

This would weaken America’s ties with allies.

3. On "Ending War by Agreement"

While some discuss ending war with agreements, everyone knows no agreement can truly resolve this war, as the agreements themselves are worthless.

No matter what happens next—letting Iran keep the strait or taking it back—it will likely lead to the worst stage of the conflict.

This decisive "ultimate battle" may be huge in scale.

The Iranian military has stated:

“All oil, economic, and energy facilities in the region that are partly owned by the U.S. or cooperate with the U.S. will be immediately destroyed and turned to ashes.”

That’s exactly what they aim to do.

If the Trump administration succeeds in persuading other countries to send warships to join the escort—and if the strait hasn’t been mined yet—we’ll see if this can be a solution.

Both sides know, the final, decisive battle still lies ahead.

They also know, if Trump and America can't reopen the strait, it will be catastrophic for them.

On the other hand, if Trump wins the final battle, eliminating Iran’s threat for at least years, it will profoundly shock the world, strengthen Trump’s authority, and show America’s power.

4. Global Impact of the "Final Battle"

The direct and indirect effects of this "final battle" will spread worldwide, impacting:Trade flowsCapital flowsGeopolitical developments with relevant countries

The current war and other recent wars are actually just part of a larger "Big Cycle" that includes financial, political, and technological influences.

The best way to understand these effects is to study similar historical wars and apply the lessons to the current environment.

For example:

A country’s financial and military war capabilities depend on the number and intensity of wars it’s engaged in, domestic political conditions, and relationships with other countries sharing interests.

The U.S. cannot fight multiple wars at once—in fact, no country can.

In a highly interconnected world, war spreads like a pandemic, in ways unimaginable.

At the same time, within countries—especially democracies with big wealth gaps and value differences—there is always fierce debate about what to do and who should bear what cost (in money or lives).

It's almost certain the direct and indirect chains of reaction will be very complex and hard to predict, but the result is unlikely to be very good.

Conclusion

Finally, I want to stress, I am not a politician.

I am just a pragmatist, staking on what might happen in the future. I study history to extract lessons to make better judgments. Now, I just share these principles and thoughts, hoping to help others navigate better in this turbulent era.

As I explained before, by studying 500 years of rise and fall of empires and reserve currencies—for my global macro investing, shared in "The Changing World Order" book and video—I found five interrelated forces dictate the rise and fall of currency, political, and geopolitical orders.

They are:The Long-Term Debt Cycle (explained fully in "How Countries Go Broke")Cycles of Political Order and Chaos (developed in identifiable stages, leading to civil war in extreme cases)Cycles of International Geopolitical Order and Chaos (also staged, and leading to world wars at extremes)Technological Advance (can both improve and destroy life)Natural Forces

Current events in the Middle East are just a small fragment of this "Big Cycle" at this moment.

Though we can’t predict every detail, measuring the health of these five forces and the trajectory of the "Big Cycle" isn’t hard.

What matters is to ask yourself:

Is this "Big Cycle" really happening? Do these indicators show which stage we are in? If yes, what should I do?

If you’d like to ask questions in the comments, I’m always glad to discuss these issues further.

Risk reminder and disclaimerThe market involves risk and investments should be cautious. This article does not constitute personalized investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investments made on this basis are at your own risk. ```