It All Comes Down to Who Controls the Strait of Hormuz: The "Final Battle"
Original author: Ray Dalio
Introduction: In most wars, disagreement and uncertainty are the norm. But in this conflict surrounding Iran, the criteria for victory are unusually clear: who controls the Strait of Hormuz.
This is not merely an energy transit route, but a "valve" for global capital flows and geopolitical power structures. Once access rights are weaponized, their impact will rapidly spill over into oil prices, inflation, financial markets, and even the entire international order.
Author Ray Dalio’s assessment in this article is straightforward: if Iran retains control over the Strait of Hormuz—even if only as a bargaining chip—the war will be seen as a defeat for the United States. And the significance of such a defeat extends far beyond the outcome of a single military operation.
Drawing on historical comparisons, the author notes that similar nodes often correspond to turning points in power structures; building on this, the author places this conflict within a broader framework of "historical long cycles," arguing that the current situation in the Middle East is merely part of the evolving interplay of debt, politics, and geopolitical dynamics.
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.
The following is the original text:
Comparing current events with similar historical situations, and using the judgments of better-informed and more experienced decision-makers and experts to refine my own thinking, has always helped me make better decisions.
I find that this is accompanied by significant disagreements and surprises about the future direction. However, when it comes to this conflict, there is little dispute over one judgment: the key lies solely in who controls the Strait of Hormuz.
The consensus I’ve heard from government officials around the world, geopolitical experts, and observers across different regions is: if Iran retains control over access to the Strait of Hormuz, or even merely preserves its ability to use it as a negotiating lever, then
The general view I’ve heard from government officials around the world, geopolitical experts, and people everywhere is that if Iran continues to maintain control over access to the Strait of Hormuz, or even merely retains it as a negotiating chip, then:
The United States will lose, Iran will win
The U.S. will be seen as having lost the war, while Iran will be seen as the winner. The reason is simple: if Iran can treat 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 world’s most critical energy chokepoints and should be safeguarded at all costs. If blocked by Iran, the damage would extend beyond the United States to its Gulf allies, nations dependent on oil shipments, the global economy, and even the entire international order.
In outcome terms, the victor of this conflict can almost be measured by one metric: whether safe passage through the Strait of Hormuz can be guaranteed. If Trump and the United States fail to “win” this conflict, they will not only be seen as losers but also as having created an untenable situation.
As for why it couldn’t be won, it’s actually not important. Is it due to anti-war sentiment affecting the midterm elections? Is it because American society is unwilling to bear the costs of war? Is it due to insufficient military capability? Or is it the inability to rally allies to jointly maintain open sea lanes?
None of that matters. The result is clear: the United States lost.
Historically, such a failure could carry profound significance. Losing control of the Strait of Hormuz could be as pivotal for the United States as the 1956 Suez Canal Crisis was for Britain—when Britain was forced to concede on the canal, marking a shift in global power—or for Spain in the 17th century, which declined due to fiscal strain and weakened naval power, or for the Netherlands in the 18th century, which lost its status as the center of trade and finance to Britain. These were all defining moments in the decline of empires.
History repeatedly plays out a similar script: a seemingly weaker nation challenges the dominant power at a critical trade route; the dominant power issues threats, and the world watches to see the outcome; then, alliances and capital are reallocated based on who wins or loses.
This decisive "key battle" often rapidly reshapes history, as people and capital naturally flow toward the winner. This shift is immediately reflected in markets—bonds, currencies, gold, and even deeper geopolitical power structures.
Based on a large number of historical cases, I’ve distilled a simple but important principle: when a dominant country with reserve currency status engages in excessive fiscal expansion while simultaneously showing signs of weakness in both military and financial domains, be alert—its allies and creditors may begin to lose confidence, leading to debt sell-offs, currency depreciation, and even a challenge to its reserve currency status.
If the United States and Trump cannot control shipping traffic in the Strait of Hormuz, this risk will rise significantly.
In the past, it was assumed that the United States could overwhelm its rivals militarily and financially. But the cumulative impact of Vietnam, Afghanistan, Iraq, and potentially this conflict is eroding that belief and undermining the postwar international order led by the United States.
Conversely, the same holds true: when a dominant nation demonstrates clear military and financial strength, confidence is reinforced. For example, Ronald Reagan quickly secured the release of hostages by Iran upon taking office and provided escort protection for oil tankers during the Iran-Iraq War, both of which strengthened U.S. deterrence.
If Trump can deliver on his promises to ensure the畅通 of the Strait of Hormuz and suppress Iranian threats, it will significantly strengthen global confidence in U.S. strength.
Conversely, if the Strait of Hormuz falls into Iranian hands and is used as a tool of coercion, the world will become its hostage. This would not only mean that the global energy lifeline is being held hostage, but also that the United States has sparked a conflict it cannot win. Trump’s credibility would be directly undermined, especially given his previous strong statements.
Many foreign policymakers privately hold a very straightforward view: “He speaks well, but can he win when it matters most?” Some observers even regard this conflict as a “final showdown,” watching it like a gladiatorial arena or a championship final.
Trump is calling on other countries to join the escort mission, and his ability to rally allies is itself a test of leadership. The reality is that the U.S. and Israel alone struggle to secure the waterways without weakening Iran’s control, which likely requires a major military confrontation.
Iran’s stance stands in stark contrast to that of the United States. For them, this is a war of belief and survival—they are willing to bear greater costs, even at the cost of their lives. In contrast, American society is more concerned with oil prices, and American politics is more focused on elections.
In war, who can endure pain better is often more important than who can inflict pain better.
Iran’s strategy is likely to prolong the conflict, dragging it out until the U.S. loses patience and withdraws. Should this happen, America’s allies will quickly realize that the U.S. does not always stand firmly behind them.
"Negotiated resolution" is merely a superficial option.
Although there are discussions about ending the war through agreements, everyone understands: agreements cannot truly solve the problem. Almost everyone knows that such conflicts cannot be genuinely resolved by agreements. The true deciding factor will be the next "critical battle."
Whether Iran retains control of the Strait of Hormuz or loses it, the conflict will enter its most intense phase. This decisive "final battle" is likely to be of enormous scale.
The Iranian military has stated: “Any regional energy facilities associated with or cooperating with the United States will be completely destroyed.” This is precisely the action they may take. If the Trump administration successfully rallies other nations to deploy naval escorts and the waterway has not yet been mined, this could be a potential solution. However, both sides are well aware that the decisive battle still lies ahead. If the United States fails to reopen the strait, the consequences will be extremely severe; conversely, if Trump wins this confrontation and eliminates the Iranian threat, his prestige will be greatly enhanced, and American strength will be powerfully demonstrated.
The "decisive battle" will impact the world.
The direct and indirect impacts of this "decisive battle" will reverberate globally. It will affect trade flows, capital flows, and the geopolitical landscape involving China, Russia, North Korea, Cuba, Ukraine, Europe, India, Japan, and others. More importantly, this conflict is not an isolated event, but part of a larger "historical cycle" driven simultaneously by financial, political, and technological forces. The situation in the Middle East is merely one facet of this broader picture.
For example, whether a country can win a war depends on the number and intensity of its conflicts, its domestic political situation, and its relationships with nations sharing similar interests, such as Iran, Russia, China, and North Korea. No country has the capacity to simultaneously manage multiple wars, and in today’s highly interconnected world, wars spread in unpredictable ways, much like pandemics.
Meanwhile, domestically—especially in democratic nations with significant divisions over wealth and values—there are always intense debates about whether to go to war and who should bear the costs (financial or human). These complex ripple effects, though difficult to predict, typically lead to unfavorable outcomes.
Finally, I want to emphasize that I am not speaking from a political stance, but as someone who must make judgments about the future. By studying the history of the rise and fall of empires and the shifts in reserve currencies over the past 500 years, I have identified five key forces driving changes in the global order:
1) Long-term debt cycle
2) The rise and fall cycle of political order
3) The cycle of international geopolitical order
4) Technological advancements
5) Natural events
The current situation in the Middle East is merely one segment of this larger cycle. Although it is impossible to precisely predict all details, the state of these forces can be observed and measured.
History doesn't always repeat itself, but it often moves in similar rhythms. What truly matters is determining whether this "major cycle" is currently unfolding, identifying which stage we're in, and understanding how you should act within this context.