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

Original Author: Ray Dalio

Introduction: In most conflicts, divergence and uncertainty are the norm. But in this confrontation involving Iran, the criteria for victory are remarkably clear: who controls the Strait of Hormuz.

This is not merely an energy transit route—it is the "valve" governing global capital flows and geopolitical power structures. Once control over passage is weaponized, its impact will rapidly spill over into oil prices, inflation, financial markets, and even the entire international order.

In this article, Ray Dalio offers a straightforward assessment: if Iran retains control over the Strait of Hormuz—whether through actual dominance or simply as a bargaining chip—the war will be deemed a defeat for the United States in outcome. And the implications of such a loss extend far beyond mere military gains or losses.

Drawing from historical parallels, the author notes that similar junctures often mark turning points in power structures. He situates this conflict within a broader framework of "great historical cycles," arguing that today’s Middle East situation is merely one manifestation of the co-evolution of debt, politics, and geopolitical dynamics.

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

Below is the original text:

Comparing current events with analogous historical situations, and calibrating one's thinking through insights from more informed and mature decision-makers and experts, has consistently helped me make better decisions.

I have found that periods marked by profound disagreement and unexpected developments are common. Yet in this particular conflict, there is near-unanimity on one point: the decisive factor lies solely in who controls the Strait of Hormuz.

The consensus I’ve heard from government officials, geopolitical experts, and observers across different regions is clear: if Iran maintains control over passage through the Strait of Hormuz, or even retains the ability to use it as a negotiating tool,

the prevailing view among policymakers, geopolicymakers, and global observers is that if Iran continues to hold sway over access to the Strait of Hormuz—let alone retain leverage to negotiate with it—then:

The U.S. Loses, Iran Wins

The U.S. will be seen as having lost the war, while Iran will be perceived as the victor. The reason is simple: if Iran can weaponize the Strait of Hormuz, it demonstrates that the U.S. lacks the capability to resolve this issue.

This strait is one of the world’s most critical energy corridors, and its uninterrupted flow should be safeguarded at all costs. Should Iran block it, the consequences would extend far beyond the U.S.—impacting Gulf allies, oil-dependent nations, the global economy, and the entire international system.

In practical terms, the outcome of this war can almost be measured by a single metric: whether the safety of the Strait of Hormuz can be guaranteed. If Trump and the U.S. fail to "win" this conflict, they won’t just be seen as losers—they’ll be viewed as having created an unmanageable crisis.

Why they cannot win is less important. Is it domestic anti-war sentiment affecting midterm elections? Is American society unwilling to bear the cost of war? Is military capability insufficient? Or is the inability to rally allies to maintain open sea lanes?

None of these matter. The result is singular: the U.S. loses.

Historically, such a failure could carry severe consequences. Losing control of the Strait of Hormuz may represent for the U.S. what the Suez Crisis of 1956 meant for Britain (forced concessions over the canal, leading to a shift in global power), or what fiscal overextension and naval decline meant for 17th-century Spain, or the commercial and financial eclipse of 18th-century Holland—each marking a pivotal moment in imperial decline.

History repeatedly reenacts similar scripts: a seemingly weaker nation challenges the dominant power at a critical trade chokepoint; the hegemon issues threats, the world watches; then, based on the outcome, positions and capital are reallocated.

The decisive "battle" that determines the outcome often rapidly reshapes history, as people and capital instinctively flow toward the winner. This shift is immediately reflected in markets—bonds, currencies, gold—and deeper structures of geopolitical power.

Based on extensive historical precedent, I have distilled a simple but crucial principle: when a dominant country with reserve currency status experiences excessive fiscal expansion, coupled with visible weakness in military and financial domains, one must be vigilant—allies and creditors may begin losing confidence, debt may be dumped, currency may weaken, and even the reserve currency status may come under threat.

If the U.S. and Trump cannot regain control over shipping flows through the Strait of Hormuz, this risk escalates significantly.

In the past, it was assumed the U.S. could decisively outmatch opponents militarily and financially. But the cumulative effects of Vietnam, Afghanistan, Iraq, and now potentially this conflict are eroding that belief—and undermining the postwar international order dominated by the U.S.

Conversely, when a dominant power clearly demonstrates robust military and financial strength, confidence is reinforced. For example, Ronald Reagan swiftly secured the release of hostages from Iran upon taking office and provided escort protection for oil tankers during the Iran-Iraq War—all actions that strengthened U.S. deterrence.

If Trump can deliver on his promises to secure the free flow of the Strait of Hormuz and contain Iranian threats, it would significantly bolster global confidence in U.S. power.

On the other hand, if the Strait falls into Iranian hands and becomes a tool of coercion, the world would effectively become hostage to Iran. This would mean not only the global energy lifeline being held hostage, but also the perception that the U.S. started a war yet failed to win. Trump’s credibility would suffer direct damage—especially given his previous hardline rhetoric.

Many foreign policymakers privately express a stark view: “He speaks boldly, but can he actually win when it counts?” Some observers even regard this conflict as a “final showdown,” watching it like a gladiator match or championship game.

Trump is calling on other nations to join escort operations, but whether he can genuinely mobilize allies is itself a test of capability. The reality is that relying solely on the U.S. and Israel is unlikely to ensure safe passage without weakening Iranian control—a scenario that may well require a full-scale major conflict.

Iran’s stance stands in sharp contrast. For them, this is a war of survival and ideology. They are willing to endure greater costs, even sacrifice lives. Meanwhile, American society cares more about oil prices, and American politics focuses more on elections.

In war, the ability to “endure pain” often matters more than the capacity to “inflict pain.”

Iran’s likely strategy is delay—prolonging and intensifying the conflict until the U.S. loses patience and withdraws. Should this happen, U.S. allies would quickly realize: the U.S. may not always stand behind them.

“Negotiated Settlement” Is Only a Surface Option

While discussions exist about ending the war via agreement, everyone understands: no treaty can truly resolve the underlying issue. Almost universally, it’s recognized that such conflicts cannot be permanently ended through agreements. The true determinant of victory lies in the coming “decisive battle.”

Regardless of whether Iran continues to control the Strait or loses that control, the conflict will enter its most intense phase. The “final showdown” that decides the outcome is likely to be massive in scale.

Iranian military officials have stated: “All regional energy infrastructure associated with or cooperating with the U.S. will be destroyed.” This is precisely the action they may take. If the Trump administration successfully coordinates international naval escorts and the strait has not yet been mined, this could be a viable path forward. But both sides know the true deciding battle still lies ahead. If the U.S. fails to reopen the strait, the consequences would be catastrophic; conversely, if Trump wins this battle and eliminates the Iranian threat, his prestige would soar, and U.S. power would be visibly reaffirmed.

The “Decisive Battle” Will Reshape the World

The direct and indirect impacts of this “decisive battle” will ripple globally. It will affect 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—it is part of a larger “great historical cycle,” driven simultaneously by financial, political, and technological forces. The Middle East situation is merely one facet of this broader pattern.

For instance, a nation’s ability to win a war depends on its war intensity and duration, domestic political stability, and relationships with like-minded states (such as Iran, Russia, China, North Korea). No state can sustain multiple wars simultaneously, and in an interconnected world, wars spread unpredictably—like pandemics.

Meanwhile, domestically—particularly in democracies with significant wealth and value divides—there will inevitably be fierce debate over whether to engage in war and who should bear the cost (in money or lives). These complex cascading effects are difficult to predict, but outcomes are rarely favorable.

Finally, I want to emphasize: I am speaking not from a political stance, but from the necessity of making judgments about the future. By studying the rise and fall of empires and shifts in reserve currencies over the past 500 years, I have identified five fundamental forces driving changes in the world order:

1) Long-term debt cycles

2) Cycles of political order and disorder

3) Cycles of international geopolitical order

4) Technological advancement

5) Natural events

The current Middle East situation is just one fragment of this “great cycle.” While precise predictions of every detail remain impossible, the state of these forces can be observed and measured.

History may not repeat itself exactly, but it often follows similar rhythms. What truly matters is your ability to assess whether this “great cycle” is unfolding, where we are in its stages, and how you should act within this context.