Ray Dalio: If the United States loses the Strait of Hormuz, it will lose far more than just a war

Title: It All Comes Down to Who Controls the Strait of Hormuz: The “Final Battle”

Author: Ray Dalio

Compiled by: Peggy, BlockBeats

Editor’s Note: In most wars, disagreements and uncertainties are often the norm. But in this conflict surrounding Iran, the criteria for victory or defeat are unusually clear: who controls the Strait of Hormuz.

This is not just a vital energy transit route but also a “valve” for global capital flows and geopolitical power structures. Once the passage rights are weaponized, their impact quickly spills over into oil prices, inflation, financial markets, and even the entire international order.

Ray Dalio’s assessment in this article is quite straightforward: if Iran maintains control over the Strait of Hormuz (even just as leverage in negotiations), this war’s outcome will be seen as a failure for the U.S. And the significance of such a failure goes far beyond the gains or losses of a military operation.

From a historical perspective, the author points out that such pivotal moments often mark shifts in power structures; based on this, he places this conflict within a larger “big cycle” of history, viewing the current Middle East situation as part of the combined evolution of debt, politics, and geopolitical patterns.

When the outcome of a war can be measured by whether a strait remains open, its significance extends beyond the Middle East and points toward the next phase of the global order.

Below is the original text:

Comparing current events with similar historical scenarios, and calibrating one’s thinking with the judgments of more informed and experienced decision-makers and experts, has always helped me make better decisions.

I find that these situations are often accompanied by significant disagreements and surprises about the future. However, in this conflict, one judgment is almost universally agreed upon: the key point is who controls the Strait of Hormuz.

The consensus I hear from government officials, geopolitical experts, and observers around the world is: if Iran still holds control over the passage through the Strait of Hormuz, or even just retains the bargaining chip of that control,

The common view I hear from officials, geopolitical experts, and people worldwide is: if Iran continues to control the passage through the Strait of Hormuz, or even just keeps it as leverage in negotiations,

The U.S. Will Lose, Iran Will Win

The U.S. will be seen as losing this war, and Iran as winning. The reason is simple: if Iran can wield the Strait of Hormuz as a “weapon,” it means the U.S. lacks the ability to resolve this issue.

This strait is one of the most critical energy routes globally and should be protected at all costs. Because if Iran blocks it, the damage will not only be to the U.S. but also to its Gulf allies, oil-dependent nations, the global economy, and the entire international order.

In terms of results, the outcome of this war can be almost entirely measured by whether the Strait of Hormuz remains open and secure. If Trump and the U.S. cannot “win” this war, they will not only be seen as failures but also as having created an unresolvable deadlock.

Why they can’t win is less important. Is it domestic anti-war sentiment affecting midterm elections? Is American society unwilling to bear the costs of war? Is it insufficient military capability? Or inability to rally allies to keep the channel open?

These are irrelevant. The only result that matters is: America loses.

Historically, such a failure can be very significant. Losing control of the Strait of Hormuz could be akin to the 1956 Suez Canal Crisis for Britain (where Britain was forced to concede on the canal, shifting global power), or to Spain in the 17th century (weakened by fiscal overreach and naval decline), or the Netherlands in the 18th century (declining as Britain replaced it as trade and financial center), all marking moments of imperial decline.

History often repeats similar scripts: a seemingly weaker nation challenges dominant powers over key trade routes; the great powers issue threats, and the world watches the outcome; then, based on victory or defeat, positions and capital are redistributed.

This decisive “final battle” often rapidly reshapes history because people and money instinctively flow toward the winners. This shift directly impacts markets—bonds, currencies, gold—and deeper geopolitical power structures.

Based on numerous historical cases, I have summarized a simple but crucial principle: when a dominant country with reserve currency status overextends fiscally and simultaneously shows weakness in military and financial strength, allies and creditors may start losing confidence, leading to debt sell-offs, currency weakening, and even the erosion of reserve currency status.

If the U.S. and Trump cannot control the flow of shipping through the Strait of Hormuz, these risks will significantly increase.

In the past, it was assumed that the U.S. could overwhelm opponents militarily and financially. But Vietnam, Afghanistan, Iraq, and potentially this conflict are eroding that confidence. The cumulative effect is shaking the post-WWII U.S.-led international order.

Conversely, when a leading power demonstrates clear military and financial strength, confidence is reinforced. For example, Ronald Reagan, after taking office, quickly facilitated the release of hostages in Iran and provided escort for oil tankers during the Iran-Iraq war, strengthening U.S. deterrence.

If Trump can deliver on his promises—ensuring the Strait of Hormuz remains open and suppressing Iran’s threats—it would significantly boost global confidence in U.S. strength.

Conversely, if the Strait falls into Iran’s hands and is used as a threat, the world becomes hostage to Iran. This not only means global energy supplies are “hijacked” but also that the U.S. has “provoked a war but failed to win.” Trump’s credibility will be directly impacted, especially given his previous tough rhetoric.

Many foreign policymakers privately believe: “He talks a good game, but can he win when it counts?” Some even see this conflict as an “ultimate showdown,” like a gladiatorial or championship fight.

Trump is calling for other countries to join escort missions, and whether he can truly rally allies is a test of his capability. The reality is, relying solely on the U.S. and Israel makes it difficult to secure the passage without weakening Iran’s control, likely requiring a large-scale conflict.

Iran’s stance contrasts sharply with the U.S. They see this as a matter of faith and survival. They are willing to bear greater costs, even sacrifice lives. Meanwhile, U.S. society cares more about oil prices, and U.S. politics focus on elections.

In war, who can “endure pain” often matters more than who can “inflict pain.”

Iran’s likely strategy is to drag out the conflict, prolonging the pain until the U.S. loses patience and withdraws. Once that happens, U.S. allies will quickly realize: America won’t always stand behind them.

“Negotiated Settlement” Is Only a Surface Option

Although there is discussion about ending the war through agreements, everyone knows: treaties cannot truly resolve the core issues. Almost everyone understands that such conflicts cannot be ended by agreements alone. The real decisive moment is the next “key battle.”

Whether Iran continues to control the Strait or loses control, the conflict will enter its most intense phase. This final decisive battle will likely be very large in scale.

Iranian military officials have stated: “Any regional energy facilities related to or cooperating with the U.S. will be destroyed.” That is likely their intended action. If the Trump administration successfully coordinates with other nations to send warships escorting the passage, and if the strait remains unmined, that could be a path to resolution. But both sides know, the real decisive battle is still ahead. If the U.S. cannot reopen the strait, the consequences will be dire; if Trump wins and eliminates Iran’s threat, it will greatly enhance his prestige and demonstrate U.S. strength.

The “Decisive Battle” Will Impact the World

The direct and indirect effects of this “decisive battle” will ripple globally. It will influence trade flows, capital movements, and geopolitical alignments involving China, Russia, North Korea, Cuba, Ukraine, Europe, India, Japan, and others. More importantly, this conflict is not isolated but part of a larger “big cycle” of history driven by financial, political, and technological forces. The Middle East is just one facet of this cycle.

For example, whether a country can win wars depends on the number and intensity of conflicts, domestic political stability, and relations with allied interests (like Iran, Russia, China, North Korea). No country can handle multiple wars simultaneously, and in a highly interconnected world, conflicts can spread unpredictably like a pandemic.

At home, especially in democracies with significant wealth and value differences, fierce debates will arise over “whether to fight” and “who bears the costs (funds or lives).” These complex chain reactions are hard to predict, but the outcomes are often less than ideal.

Finally, I want to emphasize that I am not speaking from a political stance but as someone who must assess the future. By studying the past 500 years of empire rise and fall and reserve currency shifts, I have identified five major forces driving world order changes:

1. Long-term debt cycles

2. Political order cycles

3. International geopolitical cycles

4. Technological progress

5. Natural events

The current Middle East situation is just a fragment of this “big cycle.” While we cannot predict all details precisely, the states of these forces can be observed and measured.

History may not repeat exactly, but it often moves to similar rhythms. The key is to judge whether this “big cycle” is unfolding, what stage we are in, and how to act within this context.