The Endgame of the Persian Gulf: The Twilight of the Dollar and the Dawn of the A-Share Market

When it comes to stock trading, look to analysis reports by Golden Kirin analysts—authoritative, professional, timely, and comprehensive. Help you uncover high-potential thematic opportunities!

Source: Xiqi Hand Notes

Preface

Historic turning points are often etched onto specific geographic coordinates. When the walls of Constantinople crumble into rubble under the Ottoman Empire’s giant cannons, the thousand-year glory of Byzantium is sealed away in dust; when the Union Jack over the Suez Canal is forced to lower, the canal hegemony of the “Day-Not-Yet” empire is declared to have changed hands; when the bricks of the Berlin Wall collapse amid cheers from millions, the Soviet superpower status is gone forever……

The decline of an empire begins with the loss of a strategic stronghold.

Although an empire’s collapse is not something that happens overnight, it is the long, drawn-out ebb and flow of comprehensive national strength. Yet history’s script is never short on dramatic climaxes. Hormuz, the throat that controls the world’s energy lifeline, is destined to become the testing ground for hegemony in the new era. Once control over this key strait is lost, U.S. hegemony—built on petrodollars as its cornerstone—will be heading for the end.

As the United States prepares to loose its bow and go to ground battle, we who are in the financial markets can only feel bewilderment under our feet, but we can hardly discern the course ahead. Many may get lost in calculating gains and losses from one city to the next, only to misjudge the direction in the long run. Those who are truly farsighted, however, can listen to the prelude to a global reshuffle of wealth from the sudden changes in geopolitics.

Body

As the ten-day deadline threatened by Trump is approaching, Ray Dalio, founder of Bridgewater Associates, made a famous assertion: if the United States were to lose control of the Strait of Hormuz—even if only partially losing it—it would reenact the tragedy of Britain losing the Suez Canal. This means the collapse of U.S. hegemony credit, and it is irreversible.

As a top-tier investment master worldwide, Dalio’s insight points straight to the essence. However, the historical mirror is not simply a matter of copying the past. Today’s United States is still in the prime of life, far from being the Britain whose sun had set after World War II. In fact, this Hormuz battle that stirs global affairs is, for the United States, more like an old historical mirror—the “Wanli Korean War” of the mid-to-late Ming dynasty. It is the same kind of tactical victory that appears to defend an alliance system, yet it exposes, in a way no one expected, the cost an empire pays to maintain its global order—an amount already beyond the “soft ribs” it can afford.

History is not simply repeating itself, yet it often marches to similar rhymes. When ground battles at the Strait of Hormuz are about to break out, Xiqi draws on the “Wanli Korean War” from more than four hundred years ago, building an analytical framework that spans “strategic intent” and “war costs” to “war endgame.” It deeply models how the Hormuz incident might unfold, and ultimately focuses on how it will reshape global wealth and the landscape of financial markets.

First, from a military perspective—the war’s intent—using the Wanli war as a mirror to compare and analyze the U.S.-Iran conflict, why a costly tactical victory often turns into a strategic failure.

Second, from a fiscal perspective—the war’s costs—from Zhang Juzheng to Trump, the empire’s reformers always resist destiny. Unfortunately, an unsolvable fiscal predicament means the cost of war is destined to remain high.

Finally, from a financial perspective—the war’s endgame—within the global financial landscape, after the “silk-silver” and “oil-dollar” system collapses, why we may see the return of gold and A-shares to the throne.

【The Wanli War & the U.S.-Iran War: War Intent from a Military Perspective】

During the Wanli era of the Ming dynasty, Japan under Toyotomi Hideyoshi boldly invaded Korea. Emperor Wanli issued the edict, “Troublemakers, even if strong, will surely be executed,” and mobilized the entire nation to aid Korea. This was not merely ties of vassalage; it was a霸权保卫 war waged by the Ming dynasty to uphold its “tribute system.” Within this system, the Korean Peninsula was not only a physical barrier guarding the capital region and keeping Japanese troubles at bay, but also a political symbol of the “Celestial Dynasty,” with the light of “Heavenly order” shining over the Four Quarters and the Hua-Yi order running in an orderly fashion.

Hundreds of years later, the foundation of U.S. hegemony is the “oil-dollar” system. By ensuring that global major oil transactions are settled in U.S. dollars, the United States is able to control the flow of world capital and use that to support its enormous military spending and the credibility of its national debt. The Strait of Hormuz, as the throat through which more than one-fifth of global oil trade passes, naturally becomes the “life-or-death” point of the empire in the new era. Any challenge to freedom of navigation through it is, at its core, a shake to the foundation of dollar hegemony.

The Wanli Korean battlefield then and the Strait of Hormuz today—one fought for a “ritual-governed” totem, the other for the “gold-power” lifeline—are essentially a fated showdown: an empire must fight to protect the foundations of its hegemony. On the Korean battlefield during the Wanli period, the Ming dynasty marshaled the full strength of the realm and eventually drove Toyotomi Hideyoshi’s tiger-and-wolf troops out of the peninsula. On the surface, it was a victory that defended the dignity of the suzerain state. In reality, it can be called a classic “Pyrrhic victory”: first, the war consumed the “treasury reserves” accumulated since Zhang Juzheng’s reforms, and the enormous costs of nearly eight million taels of silver left the empire’s finances in structural depletion. From then on, it could no longer effectively suppress the internal chaos that would later sweep across the entire country. Second, this campaign stripped the empire of its most elite equipment—the Liaodong Iron Cavalry—leaving an irreplaceable strategic vacuum along the northern frontier defense lines. It opened a once-in-a-millennium opportunity window for Nurhaci, the long-simmering Jurchen leader, ultimately and indirectly cultivating the gravediggers of the Ming dynasty.

The current struggle over the Strait of Hormuz seems to be repeating the fate of the Ming dynasty. The United States, relying on its military-domain advantage in the air, achieves major results in the aerial battlefield, yet it must face the subsequent morass of Iran’s asymmetric warfare. Iran uses mines, drones, and missiles to carry out long-term, low-cost raids and blockades against the Strait of Hormuz. Its situation has already gone beyond the Middle East: first, once energy transportation is disrupted for a long time and ultimately triggers severe global stagnation and inflation, it is like adding insult to injury for the United States, which is already teetering on the edge of a fiscal cliff; second, when a superpower can no longer secure the world’s most critical energy artery at controllable costs, its status as a “guarantor of world order” and the oil-dollar system that sustains its hegemony will be fundamentally called into question; finally, Washington will be forced to spend valuable strategic resources and attention in a prolonged entanglement with Iran. Its true global rival is likely to seize the strategic vacuum window like Nurhaci did and win an important development opportunity in big-power competition.

No matter which direction the war unfolds, the United States has in fact fallen into a strategic dead-end from which it will be hard to win no matter how it chooses. It faces three possible gloomy prospects: first, Trump ultimately compromises and gives way, effectively accepting Iran’s substantive control over the strait. This is tantamount to publicly acknowledging the end of U.S. Middle East hegemony, which would trigger a domino effect: traditional allies such as Saudi Arabia would be forced to speed up the shift “to the East,” seeking new security guarantees and energy-trade partners; second, after a limited ground war, U.S. and Iran jointly control the area, forming the most “respectable” stalemate. U.S. naval fleets may protect oil tankers for part of the “core allies” at high cost, while Iran, leveraging its geographic advantage, continues to harass. This kind of “U.S.-Iran joint management” scenario itself is also evidence of the decline of U.S. hegemony; third, the United States is willing to pay any price to launch a large-scale ground war to regain control, only to get stuck in the Middle East war swamp for the long term. Iran is not Iraq or Afghanistan. Its vast strategic depth, large population base, and strong nationalist cohesion will make a large-scale ground invasion evolve into a long, drawn-out nightmare.

In summary, looking from the Ming dynasty’s Korean Peninsula to America’s Strait of Hormuz, the trajectory will ultimately reveal a rule: when an empire is forced into a strategic quagmire and defends a strategic stronghold with a war that wounds the core of the nation, whether it wins or loses, the decline of its hegemony has already begun.

【Zhang Juzheng & Trump: War Costs from a Fiscal Perspective】

“Money is the first element of war; the second is money; and the third still needs money.” Four hundred years ago, Dutch military thinker Simon Stevin’s insight hit the essence straight on, viewing war as the violent liquidation of a country’s balance sheet. Whether it is the Wanli Korean War of the Ming dynasty or the cannon fire at the Strait of Hormuz today, they all follow a cold “imperial fate” behind the scenes: an empire’s ambitions always exceed its fiscal capacity to carry; the cost of maintaining hegemony always gradually becomes higher than its returns; and ultimately the fiscal predicament will worsen further amid internal and external troubles.

Under such destiny, there must be resistance. During the long process leading toward fiscal crisis, an empire will always nurture reformers who try to “save a collapsing great building.” Zhang Juzheng in the Ming dynasty and Trump in the United States are two mirror-like counterparts across four hundred years of time and space. The background in which they appear is so similar: the late Wanli-year period when Zhang Juzheng took over was a time when the royal clan was wasteful, border defenses were “bleeding,” the tax base was draining, and—at the technical level—the central treasury had effectively gone bankrupt. Trump took over the United States, a post-globalization empire with high-stacked national debt, hollowed-out industry, and overseas military expenditures already turned into a heavy “negative asset.” History puts these two reformers with very different temperaments onto the stage, giving them a mission to fight against the fiscal fate.

However, fate plays tricks. When internal and external troubles in the empire pile up and become impossible to change, even a once-in-a-generation talent cannot change the fate of the dynasty. What’s more, when this resister formed within the system steps onto the stage of the system, it has already mutated into the system itself that was once resisted. The tragedy of Zhang Juzheng’s “people die and laws vanish” lies in the fact that, with iron-handed methods, he forcibly suppressed vested interest groups, touching the interests of the massive bureaucracy of scholar-officials, the royal clan princes, and local gentry. Yet he was unable to fundamentally change the political ecosystem under absolute autocracy where “rule by man” outweighs “rule by law.” Therefore, it is destined to be a “strongman politics” reliant on personal authority, not a profound institutional revolution. Even more ironic is that the outcomes of his fiscal reforms ultimately became the capital with which Emperor Wanli could wage war with confidence and accelerate the decline of the central dynasty.

By contrast, Trump—the president who waves the banners of “anti-war” and “America First”—ultimately cannot escape the deep institutional constraints of the empire. In Middle East affairs, much of this driving force comes from a powerful force within American politics: Jewish capital and its lobbying groups. In America’s political ecosystem, no president can easily ignore, or even violate, the core demands of this group—ensuring Israel’s absolute security in the Middle East. Thus, a strong Iran with potential nuclear capability is seen by this interest group as a close-in major threat that must be contained and even removed.

After the emergence of a trend toward a protracted war at the Strait of Hormuz, regardless of tactical wins or losses, Trump will face a fiscal “double loss” situation: first, the “debt monetization” dead end after getting stuck in the war quagmire. Once the fighting becomes prolonged, for an economy that already carries more than $34 trillion in national debt and has fiscal deficits as the norm, raising the enormous war costs through traditional means is, politically, almost not feasible. Then the most convenient—and most dangerous—path will appear: resorting to the printing press at the Federal Reserve. This debt monetization would further erode global investors’ trust in dollar assets and accelerate the risk of a major rupture in U.S. debt. Second, the collapse of the “oil-dollar” system after strategic contraction. If the United States chooses strategic contraction out of fear of war costs, the consequences are equally deadly. This is not simply a transfer of military power; it is the shaking of the “oil-dollar” system after the collapse of the “Bretton Woods system.” At that time, the process of “de-dollarization” in oil transactions would accelerate significantly, and the difficulty of issuing U.S. Treasuries would rise sharply.

When people’s eyes focus on superficial military games, a deeper contest with more decisive influence has already been unfolding in the realm of fiscal policy and debt. Whether it is the helpless printing of money after falling into a war quagmire, or the hegemony unraveling after strategic contraction—the end result is the same: it pushes the United States toward an enormous fiscal crisis that cannot be avoided. Perhaps the twilight of an empire has never been about the smoke and gunfire on the battlefield; it is about the deficit on its balance sheet that can no longer be patched.

【Silk-Silver & Oil-Dollar: War’s Endgame from a Financial Perspective】

Beyond military dilemmas and fiscal pressure, what is truly worth capital markets’ attention is this: the war at the Strait of Hormuz may constitute a major disruption to the global geopolitical landscape and financial order. Although geopolitical competition is profound, it is not the focus of this article. Next, we will compare the two wars—the Ming dynasty’s and America’s—both of which involve the fate of the nation, and discuss how they will lead to a profound reconstruction of the global financial order.

Before the Wanli Korean War, the Ming dynasty built a de facto “silk-silver” financial system by leveraging its globally unrivaled handicraft production capacity—such as silk, porcelain, and tea—and its unmatched overland and maritime Silk Roads. Global markets had a rigid demand for its goods, while the Ming government set silver as the primary unit for taxation and trade settlement. Based on estimates from many historical sources, in the 16th to 18th centuries, roughly one-third of the world’s silver production ultimately flowed into China, making it an undisputed hub of trade and finance. This is identical in underlying logic to the “oil-dollar” system constructed by modern America: after the dissolution of the Bretton Woods system in the 1970s, the United States reached agreements with major oil-producing countries such as Saudi Arabia to ensure that global oil transactions were priced and settled in U.S. dollars, thereby creating a global rigid demand for the dollar.

The turning point for the Ming dynasty’s monetary and financial order was undoubtedly the Wanli Korean War. It completely drained the treasury surplus accumulated during Zhang Juzheng’s reform era, forcing the Ming court to impose additional internal levies (“San Xiang,” Liaoxi, Jiao Xi, and Lian Xiang). This severely undermined the domestic economic foundation. Externally, it faced a worsening trade environment; the inflow of silver began to slow down and even reverse, leading to severe inflation characterized by “silver becoming expensive and cash becoming cheap.” The empire’s currency credit system consequently collapsed. Today, whether the United States is dragged into a protracted war and forced to launch even more aggressive quantitative easing, or the United States withdraws from the Middle East strategic theater, causing the oil-dollar and allied system to loosen, a global wave of selling U.S. debt may be difficult to avoid. We may soon witness the Ming dynasty’s “silver becomes expensive and cash becomes cheap” moment again—the repricing of the value of hard assets (oil, gold, etc.) relative to paper dollars.

Once the foundation of the “oil-dollar” system begins to wobble, global capital will follow its most primal instinct for safety and embark on an epic migration. In the initial stage of panic and chaos, capital will rush toward the only ultimate store of value that transcends sovereign credit—gold. Gold will serve as the final settlement tool and the most reliable value anchor, becoming a “Noah’s Ark” for central banks and massive capital worldwide. We have already seen that in recent years, global central banks have been increasing gold holdings at an unprecedented pace—this is the “defensive ticket” cast in response to uncertainty about the dollar. It can be expected that as the United States suffers the destined strategic failure in the Strait of Hormuz, gold’s share in global foreign exchange reserves will gradually return to—or even surpass—the high level it had at the beginning of the Bretton Woods system. This may mean that after a recent round of severe liquidity shocks, gold prices could sustain a roaring bull market momentum once the market returns to rationality.

Meanwhile, as the dollar’s status as a reserve currency declines, global capital will inevitably begin seeking substitutes outside of gold, and the renminbi is undoubtedly the successor that the market expects: first, the renminbi has a solid real-economy anchor. China, as the only country worldwide with all industrial categories listed in the UN Industrial Classification, has its “world factory” position providing value backing similar to the old “silk-silver” system—backed by strong commodity production capacity; second, the renminbi has endogenous demand for trade settlement. As the world’s largest trading nation, China’s massive transactions with the rest of the world create the largest usage scenario for cross-border use of the renminbi.

As China becomes the long-term beneficiary of the struggle over the Strait of Hormuz, the revaluation of the renminbi and related assets will unfold gradually: first, the stock market. As the barometer of the economy and the most sensitive “tentacle” of capital, it has already kicked off the value-repair journey right after the 924 rally; second, the foreign exchange market. This year, the stabilization and rebound of the renminbi exchange rate signals that global capital has begun to reassess the potential value of the renminbi from the strategic level; finally, the real estate market. With the renminbi exchange rate firmly rising and foreign capital continuing to flow back, we believe that the real estate sector may also gradually get out of its difficulties over the next two years and see a price turning point after many years.

From ancient times to the present, the decline of empires often begins with the loss of a strategic stronghold. Who controls the Strait of Hormuz may be a matter of differing opinions at the level of military war-gaming. Yet the fate of an empire seems to have already been pre-enacted in the cold historical mirror: a seemingly brilliant military catastrophe victory must come with the inevitable price of an irreversible depletion of the empire’s finances; while an unavoidable strategic contraction means that the foundation of the global financial hegemony system is shaken by its own hand. In this grand narrative about the collapse of the old order and the emergence of a new one, we may eventually hear—

The cannon fire of Hormuz will not only mark the end of dollar hegemony, but also the prelude to a bull market in gold and A-shares.

Afterword

When the silhouettes of the British and French fleets disappeared at the far end of the Suez Canal, European imperial hegemony sank as well. The world’s compass no longer wavered—it was firmly locked onto by two brand-new magnetic poles, and the era of U.S.-Soviet rivalry thus began;

When the U.S. aircraft carrier battle groups found themselves in a dilemma—advancing and retreating uncertainly—in the Strait of Hormuz, the coordinates of the “king” of the petrodollar also became blurred. Power in the world no longer converges into a single pole; it is divided by rising forces, and a new era of a hundred contenders emerges.

		Sina statement: This message is a repost from a Sina partner media outlet. Sina.com publishes this article for the purpose of transmitting more information, and does not mean that it agrees with its viewpoints or verifies the descriptions. The content of the article is for reference only and does not constitute investment advice. Investors act at their own risk.

A huge amount of information, and precise analysis—on the Sina Finance app

责任编辑：杨赐