Dalio Warns: Losing Hormuz Would Trigger a Suez Crisis–Style Crisis for the U.S.
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Dalio Warns: Losing Hormuz Would Trigger a Suez Crisis–Style Crisis for the U.S.
The sole critical variable in this war is control over the Strait of Hormuz, and the cost of losing control could extend far beyond mere military defeat.
Navigating Web3 tides with focused insightsAuthor: Ray Dalio
Translated and edited by TechFlow
TechFlow Intro: Ray Dalio, founder of Bridgewater Associates, has rarely published a lengthy analysis on the trajectory of the Iran war. His argument is exceptionally clear-cut:
The sole critical variable in this war is control over the Strait of Hormuz—and losing control could mean far more than mere battlefield defeat. He compares it to the 1956 Suez Crisis, a pivotal turning point marking the decline of the British Empire.
The article explores the interlocking logic among reserve currencies, debt, gold, and geopolitics—offering direct relevance for macro-level asset allocation decisions.
Full text below:
I have long relied on comparing current events with analogous historical situations—and cross-checking my views with seasoned leaders and experts—as a method for making better decisions. I’ve found that most wars are marked by profound disagreement about their direction and full of unexpected twists.
Yet in this Iran war, the conclusion is strikingly obvious—and nearly unanimous across all sides: everything ultimately hinges on who controls the Strait of Hormuz.
From government leaders around the world, geopolitical experts, and individuals across the globe, I hear the same assessment: if Iran retains control over passage through the Strait—or even merely preserves it as a bargaining chip—
1. The U.S. will be deemed to have lost the war, and Iran will be deemed the winner.
This is because Iran’s use of the Strait of Hormuz as a weapon would clearly demonstrate America’s inability to resolve the situation. Allowing Iran to blockade the world’s most vital maritime chokepoint—the very waterway whose unimpeded flow must be guaranteed at all costs—would inflict massive damage on the United States, its regional allies (especially Gulf partners), countries most dependent on this oil corridor, the global economy, and the world order itself.
If Trump and the U.S. fail to win this war—and victory is measured by a single, simple criterion: ensuring safe, unimpeded passage through the Strait of Hormuz—they will likewise be judged as having triggered a catastrophe they cannot manage.
It does not matter whether the U.S. fails to secure control of the Strait due to anti-war political pressure threatening Trump’s grip on power ahead of midterm elections (prompting him to back down); due to unwillingness—on his part or among American voters—to bear the human and financial costs required to win; due to insufficient U.S. military capability to seize and sustain control; or due to his failure to assemble an international coalition capable of keeping the Strait open.
Trump and the U.S. will have already lost.
My reading of history—and my assessment of current trajectories—leads me to believe that if the U.S. loses this way, forfeiting control of the Strait of Hormuz would likely replicate the impact of the Suez Crisis on the British Empire (1956), and similar failures on the Dutch Empire in the 18th century and the Spanish Empire in the 17th century.
The pattern of imperial collapse is almost always identical. I explore this more comprehensively in my book Principles for Dealing with the Changing World Order, but here’s the essence: history offers countless examples where a relatively weaker power challenges the dominant global power over control of a critical trade route (e.g., Egypt challenging Britain’s control over the Suez Canal).
In such cases, the dominant power (e.g., Britain) threatens the weaker party (e.g., Egypt) to reopen the waterway, while observers worldwide watch closely—and adjust their stance toward these nations and the flow of capital accordingly.
This decisive “final battle”—which determines victory or defeat, survival or collapse—reshapes history precisely because people and capital rapidly and naturally flee the loser.
These shifts affect markets—especially debt, currency, and gold markets—as well as the broader geopolitical landscape.
The sheer number of such historical parallels leads me to the following principle: When the dominant global power—whose currency serves as the world’s reserve—becomes fiscally overextended, and simultaneously reveals its weakness through loss of both military and fiscal control, beware of eroding confidence among allies and creditors, loss of reserve-currency status, mass selling of debt assets, and currency depreciation—particularly against gold.
Because people, nations, and capital rapidly and naturally gravitate toward the winner—if Trump and the U.S. cannot control the flow of traffic through the Strait of Hormuz, it will threaten U.S. global power and the existing world order.
For decades, it has been widely assumed that the U.S. is the dominant power capable of defeating adversaries—both militarily and fiscally—even mid-tier powers. Yet the cumulative military, fiscal, and geopolitical consequences of the Vietnam War, the Afghanistan War, the Iraq War, and this potential Iran war are not good news for the sustainability of the U.S. and the U.S.-led world order established after 1945.
Conversely, when the world’s dominant power demonstrates its military and fiscal strength, confidence in it—and willingness to hold its debt and currency—increases.
After Reagan’s election, he immediately secured the release of U.S. hostages held by Iran; later, during the Iran-Iraq War, when Iran attacked Gulf shipping, Reagan ordered the U.S. Navy to escort oil tankers—demonstrating his—and America’s—strength vis-à-vis Iran.
If Trump proves he and the U.S. can deliver on his promise—i.e., win this war by ensuring free passage through the Strait of Hormuz and eliminating Iran’s threat to its neighbors and the world—it would dramatically boost external confidence in his—and America’s—strength.
2. Conversely, if the Strait of Hormuz remains under Iranian control and is wielded as a weapon to coerce U.S. Gulf allies and the broader global economy, then everyone becomes Iran’s hostage—and Trump will be judged as having deliberately launched a war he failed to win.
He would place U.S. allies in the region in grave difficulty and severely undermine U.S. credibility—especially given his prior statements.
For example, Trump stated: “If mines are laid for any reason and not cleared immediately, the military consequences for Iran will be unprecedented.”
“We will easily destroy those fragile 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 have our approval, or he will not last long.” I frequently hear senior decision-makers from other countries say privately: “He talks a great game—but when push comes to shove, can he fight? Can he win?” Some observers await this showdown like Romans in the Colosseum—or sports fans awaiting the championship final.
Trump is currently calling on other countries to join the U.S. in guaranteeing free passage through the Strait of Hormuz. Whether he succeeds will reflect his ability to build coalitions and marshal strength—if successful, it will be a major victory.
Ensuring safe passage for ships solely through U.S. and Israeli power—without wresting the Strait from Iranian control—is highly unlikely, and would probably require a large-scale military campaign.
The outcome of this war is literally life-or-death for Iran’s leadership—and for Iran’s largest, most powerful demographic.
For Iranians, this war is largely about revenge—and about holding fast to something more important than life itself.
They are willing to die—because demonstrating the will to die is essential to dignity and to expressing devotion, which carries the highest spiritual reward—while Americans fret over high oil prices and U.S. leaders worry about midterm elections.
In war, one’s capacity to endure pain matters even more than one’s capacity to inflict it. Iran’s strategy is to prolong and escalate the conflict, knowing full well that both the American public and its leaders possess extremely limited tolerance for suffering and protracted warfare.
Thus, if the war becomes painful enough and drags on long enough, Americans will abandon the fight—and their Gulf “allies,” along with other “allies” worldwide, will see that the U.S. will not protect them at a moment of truth.
This will damage U.S. relations with countries facing similar vulnerabilities.
3. Though discussions continue about ending this war via agreement, everyone understands that no agreement can truly resolve it—because agreements carry no weight.
Whatever happens next—whether the Strait remains in Iranian hands or control is seized—will likely represent the worst phase of the conflict. This “final battle” will starkly reveal which side won control and which side lost it—most likely involving a large-scale military engagement.
To quote the Iranian military command: “All oil, economic, and energy infrastructure in the region belonging to oil companies partially owned by or cooperating with the U.S. will be immediately destroyed and reduced to ashes.”
This is what they intend to do. If the Trump administration succeeds in getting other countries to join and dispatch naval vessels to provide convoy protection—and if the waterways have not yet been mined—we will see whether this can serve as a viable solution.
Both sides know the decisive, final battle still lies ahead. They also know the consequences will be severe if Trump and the U.S. fail to fulfill their pledge to reopen the Strait.
Conversely, if Trump wins this final battle—and neutralizes Iran’s threat for years to come—it will leave a deep impression on all observers, bolster Trump’s authority, and showcase U.S. strength.
4. The direct and indirect effects of this “final battle” will reverberate globally—impacting trade flows, capital flows, and geopolitical trajectories involving China, Russia, North Korea, Cuba, Ukraine, Europe, India, Japan, and others.
This current war—alongside recent conflicts—is part of a broader, classic “Big Cycle” evolution, with implications across financial, political, and technological dimensions.
The best way to understand these implications is to study historical analogues and apply those lessons to today’s situation.
For instance, a nation’s capacity to wage war—both financially and militarily—is shaped by the number and intensity of conflicts it engages in, its domestic political environment, and its relationships with aligned nations (e.g., the ties among Iran, Russia, China, and North Korea).
No country—including the U.S.—can fight multiple wars simultaneously, and in this highly interconnected world, wars spread as rapidly—and unpredictably—as pandemics.
Meanwhile, within each nation—especially democracies marked by vast disparities in wealth and values—the endless struggle over what should be done, who should bear how much cost, and in what form (i.e., money, lives lost, etc.) persists.
Such direct and indirect linkages and consequences are virtually certain to emerge—and will be extremely difficult to predict, but certainly not positive.
In closing this piece, I want to emphasize: I am not a politician. I am a pragmatic person who must make judgments about what lies ahead—and who relies on studying history to learn lessons that help me do so more effectively.
I now share my principles and thinking in hopes of helping others navigate this turbulent period.
As I explained previously: My research into the rise and fall of empires—and their reserve currencies—over the past 500 years (conducted to improve my global macro bets, and shared in my book and YouTube video series The Changing World Order) identifies five interconnected forces driving shifts in monetary, political, and geopolitical orders. They are:
1) The long-term debt cycle (comprehensively detailed in my book How Countries Go Broke: The Big Cycle),
2) The associated political cycle of order and disorder (which evolves in clearly identifiable stages, culminating worst-case in civil war),
3) The associated international geopolitical cycle of order and disorder (likewise evolving in clearly identifiable stages, culminating worst-case in a devastating world war),
4) Technological advancement (capable of either improving or destroying lives), and
5) Natural phenomena.
Everything unfolding in the Middle East today is merely a small component of this Big Cycle at this particular moment.
While predicting—and fully grasping—all details is impossible, assessing the health and stage of evolution of these five forces—and the Big Cycle as a whole—is actually quite straightforward.
What matters most for you is to ask yourself: Is this Big Cycle real? Do these indicators reveal where we stand within it—and if so, what should I do?
If you’d like to pose questions in the comments, I’m ready to engage with you on these topics.
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