Ray Dalio's new article: The world is entering a war cycle

Original author: Ray Dalio | Compiled by Peggy, BlockBeats

Editor’s note: While the market is still repeatedly pricing short-term questions like “how long will the conflict last” and “where will oil prices go,” this article tries to pull the perspective back to a much longer time horizon. Ray Dalio, founder of Bridgewater Associates, believes that a series of current regional conflicts are stitching together into a “world-scale conflict” that has not yet been clearly named. Its evolutionary logic is closer to the cyclical stages in the period just before major wars in history.

Through a “big cycle” lens, the article breaks down today’s situation into a set of structural changes occurring in synchrony: a reshuffling of camps, escalating clashes in trade and capital, key corridors being “weaponized,” parallel conflict unfolding across multiple theaters, and mounting pressure on domestic politics and financial systems. Within this framework, the Iran–U.S. conflict is no longer only a Middle East issue; it becomes a window for observing how the global order is being reshaped—how it will affect ally trust, resource allocation, and strategic decision-making, and then spill over into broader regions such as Asia and Europe.

More importantly, the article repeatedly emphasizes a variable that is being overlooked: who wins a war does not depend on absolute strength, but on each side’s ability to sustain long-term attrition. This assessment shifts the analysis from “who is stronger” to “who can last longer,” and it places the United States in a more complicated position—it is both the most powerful country right now and also the one that is “most overextended” in global commitments.

In the author’s view, the market’s implicit assumption at present—that the conflict will end in the short term and that order will return to normal—may itself be the biggest misjudgment. Historical experience shows that wars often do not have a clear starting point; instead, they evolve gradually out of conflicts in economics, finance, and technology, and manifest across multiple regions at the same time. The conflict paths listed in the appendix (the Middle East, Russia–Ukraine, the Korean Peninsula, the South China Sea) point to the same issue: the real risk is not whether one conflict breaks out, but whether these conflicts begin to link with one another.

As the world slides from a “rules-based order” to a “power-based order,” conflicts will no longer be exceptions and may become a new normal. Understanding this shift is the starting point for judging every variable about the future.

Below is the original text:

I’d like to start by wishing you all the best during this challenging period. At the same time, I want to clarify that the picture outlined by the observations to follow is not one that I hope comes true; it is simply the picture I’ve come to believe is closer to reality, based on the information I understand and the set of indicators I use to make objective judgments about the real world.

As an investor who has been involved in global macro investing for more than 50 years, I have had to study all the factors that have influenced the market over the past 500 years in order to deal with the constantly changing developments hitting us from all directions. In my view, most people tend to focus on—and respond to—the most eye-catching events happening right now, such as the current situation in Iran, while overlooking those forces that are more宏宏 and more important, and that are evolving over a longer timeframe. The factors that are truly driving today’s situation—and determining where things go next—are precisely these forces.

For the situation right now, the most important point is this: the war between the United States, Israel, and Iran is only one part of the world war we are in, and this war will not end quickly.

Of course, what happens next with the Strait of Hormuz—especially whether its control over passage will be taken away from Iran, and which countries are willing to pay how much in personnel and financial costs—will have an extremely far-reaching impact on the world.

In addition, there is a whole series of other questions that are also worth关注: whether Iran still has the capability to harm neighboring countries with missile and nuclear-weapon threats; how many troops the United States will send and what tasks those troops will carry out; how gasoline prices will change; and the upcoming U.S. midterm elections.

All these short-term questions matter, but they also cause people to overlook those things that are truly larger and more critical. More specifically, because most people are accustomed to looking at problems through a short-term lens, they currently— and the market is pricing accordingly—generally expect that this war won’t last long, and once it’s over, everything will return to “normal.”

But almost no one discusses a fact: we are in the early stage of a world war that will not end soon. Because I have a different framework for judging the situation, I want to explain why below.

Here are the major questions I believe truly need to be关注:

Questions worth关注

1、We are in the early stage of a world war that will not end soon.

This may sound a bit exaggerated, but one thing is undeniable: we are living in a highly connected world, and this world is simultaneously experiencing multiple hot wars (for example, the Russia–Ukraine—Europe—United States war; the Israel–Gaza—Lebanon—Syria war; the Yemen–Sudan–Saudi Arabia–UAE war, which also involves Kuwait, Egypt, Jordan, and other related countries; and the United States–Israel—Gulf Cooperation Council countries—Iran war). Most of these wars involve major nuclear powers. In addition, a large number of important “non-hot wars” are happening at the same time—namely trade wars, economic wars, capital wars, technology wars, and struggles for geopolitical influence—and nearly every country is being pulled into them.

When these conflicts come together, they form a very典型 global war that is similar to historical “world wars.” For instance, in the past, “world wars” were usually made up of multiple interrelated wars, which often had no clear start dates and no explicit declarations of war, but instead slid step by step into a state of war almost without anyone noticing. These past wars ultimately converged into a典型动力 mechanism for a world war, affecting one another. Today’s wars are also taking on the same structure.

In Chapter 6 (“The External Order and the Big Cycle of Disorder”) of my book Principles for Dealing with the Changing World Order, published about five years ago, I already described this war-dynamics mechanism in detail. If you want a more complete explanation, you can read that chapter—it is precisely the evolution trajectory we are currently going through and what is likely to happen next.

2、Understanding how each side aligns, and what their relationships with one another are, is extremely important.

To judge objectively how each side is aligning is actually not difficult. We can see it very clearly through various indicators, such as formal treaties and alliance relationships, United Nations voting records, statements by national leaders, and the actions they actually take. For example, you can see China and Russia standing together, with Russia also aligned with Iran, North Korea, and Cuba. Broadly speaking, this bloc is opposed by the United States, Ukraine (the latter aligns with most European countries), Israel, the Gulf Cooperation Council countries, Japan, and Australia, among others.

These alliance relationships are crucial for judging the future positions of the relevant parties. Therefore, when observing today’s situation and projecting the future, they must be taken into account. For example, we can already see this camp relationship reflected in the actions of China and Russia at the United Nations regarding whether Iran should be allowed to open up the Strait of Hormuz.

Another example: many people say that if the Strait of Hormuz is closed, China would be especially harmed. This is actually not correct. Because the relationship of mutual support between China and Iran likely means that oil shipped to China would still be able to pass; at the same time, China’s relationship with Russia would ensure that China can obtain oil from Russia. On top of that, China itself has many other energy sources (coal and solar power), and it also has a huge oil stockpile, roughly sufficient for 90 to 120 days of use. One more point worth noting: China consumes 80% to 90% of Iran’s oil production, which further strengthens the power foundation within the China–Iran relationship. Taken together, in this war, China and Russia seem to be relatively the economic and geopolitical winners instead. As for the oil and energy economics, the United States is in a relatively favorable position, because it is itself an energy exporter, which is a major advantage.

There are many ways to衡量 these alliance relationships, including United Nations voting records, economic ties, and key treaties. The pattern they present is basically consistent with what I described above. (If you’re interested in reviewing those representative key treaties, you can refer to Appendix 1. Similarly, if you want to understand the major wars that already exist or may occur today, and how my indicator system judges the probability that they will happen or escalate within the next five years, you can refer to Appendix 2.)

3、Study similar cases in history and compare them with today’s situation

This approach is rarely used, but it has been extremely valuable to me in both the past and the present, and it may be valuable to you as well.

For example, whether you look back at a number of similar cases in history or reason logically, it’s not hard to see: how the United States, the dominant power of the post-1945 world order, performs in a war against Iran, a medium-strength power—how much money and military equipment it will spend and consume, and to what extent it has protected (or failed to protect) its allies—will be closely observed by other countries. These observations will greatly influence how the future of the world order changes. Most importantly, we know that the outcome of the war among the United States, Israel, and now the Gulf Cooperation Council countries, versus Iran, will have a major impact on what other countries—especially Asian and European countries—do next, and this, in turn, will further deeply shape how the world order evolves.

These changes will unfold in ways that repeatedly occurred in history. For instance, by studying history, it’s easy to identify those empires that become overextended, build indicators to衡量 how much they overextended, and see how they are damaged by overextension. Applied to today, it’s natural to look at what the United States is doing: today the United States has 750 to 800 military bases across 70 to 80 countries (by the way, China has only 1), and it is undertaking security commitments worldwide that are expensive and expose vulnerabilities that are easy to detect.

At the same time, history also makes one thing clear: overextended great powers cannot successfully fight two or more wars on multiple fronts at once. This inevitably leads outsiders to question whether the United States still has the capacity to fight on another front—such as in Asia and/or Europe.

Therefore, it’s natural for me to think further about what the war with Iran today means for the geopolitical landscape in Asia and Europe, and what it means for the Middle East itself. For example, if certain issues emerge in Asia in the future—testing and exposing whether the United States is willing to meet the challenge—I would not be surprised. The United States would then find it difficult to respond effectively, because it has already made a large number of entangling commitments in the Middle East. Also, with U.S. public support for the Iran war lacking as the midterm elections approach, it would be very unrealistic for the United States to fight another war on a different front.

This dynamic may lead to an outcome: as other countries observe how U.S.–Iran relations evolve, they will recalibrate their judgments and behaviors, thereby driving the remaking of the world order. For example, leaders of countries that have U.S. military bases deployed on their territory and have long relied on U.S. security commitments are likely to learn from the actual experiences of those Middle East countries that similarly rely on U.S. protection, and adjust their strategies accordingly. Likewise, countries near key straits, with strategic chokepoints, or that have U.S. military bases deployed in potential conflict areas (such as the Asian regions where a possible U.S.–China conflict could break out) will closely watch developments in the Iran war and draw their own conclusions.

I can say with confidence that this kind of thinking is genuinely happening within the leadership of countries, and similar situations have appeared many times in comparable stages of the “big cycle.” These leaders’ judgments and adjustments are part of a classic evolutionary path that leads toward large-scale war—one that has played out repeatedly, and is playing out now. Combining today’s situation and comparing it with this classic cycle of international order and conflict, I believe we have moved into step 9. Do you also have a similar feeling?

Here are the approximate steps of this classic evolutionary path:

• The economic and military strength of the dominant world power declines relative to the rising great power; the two sides’ strength gradually converges, and they begin to confront each other in economic and military terms around points of disagreement.

• Economic warfare escalates significantly, manifested as sanctions and trade blockades.

• Economic, military, and ideological alliances gradually form.

• Proxy wars increase.

• Fiscal pressure, deficits, and debt rise, especially in those dominant states whose public finances are already overextended.

• Key industries and supply chains are gradually brought under government control.

• Trade choke points are “weaponized.”

• New types of war technology accelerate in development.

• Conflicts across multiple theaters begin to occur at the same time.

• Demands within each country for extremely high loyalty to leadership suppress anti-war (or other policy) voices—as Lincoln quoted from the Bible: “A house divided against itself cannot stand,” especially during wartime.

• Direct military conflicts break out among the major powers.

• To support the war, taxes, debt issuance, money injections, foreign exchange controls, capital controls, and financial repression increase dramatically; in some cases, markets are even shut down. (For investment logic during wartime, see Chapter 7 of Principles for Dealing with the Changing World Order.)

• Ultimately, one side defeats the other, establishes a new order, and the victorious side designs it.

Among the series of indicators I track, many show that we are in a stage within a “big cycle” in which the monetary system, parts of domestic political order, and geopolitical order are all breaking down.

These signals indicate that we are in a period transitioning from a “pre-conflict stage” to a “conflict stage,” roughly comparable to historical turning points between 1913–1914 and 1938–1939. Of course, these indicators are not precise predictions, and the picture they describe and the timing also do not have certainty.

These indicators are more like directional prompts. History tells us that wars often do not have a clearly defined starting point (unless major military events trigger formal declarations of war, such as the assassination of Archduke Franz Ferdinand, Germany’s invasion of Poland, or the Pearl Harbor incident). Economic, financial, and military conflicts typically begin before formal war breaks out. Major wars are often preceded by a series of signals, such as:

1）Armaments and resource stockpiles begin to be consumed;

2）Fiscal spending, debt, money injections, and capital controls keep rising;

3）Rival countries learn each other’s strengths and weaknesses by observing the conflict;

4）Overextended dominant powers are forced to deal with multi-front conflicts that are dispersed and far apart.

All of these factors are crucial, and the related indicators I observe are already enough to keep people on high alert.

In this stage of the cycle, the typical evolution path of conflict is not de-escalation, but continued escalation. Therefore, what happens next depends to a large extent on the course of the Iran–U.S. conflict. For example, some countries already have more doubts about whether the United States will honor its defense commitments. At the same time, the recognition that nuclear weapons have both defensive and offensive capabilities is pushing policymakers in various countries to discuss more about acquiring nuclear weapons, expanding nuclear stockpiles, and strengthening missile and anti-missile systems.

Once again, I’m not saying the situation will necessarily continue to deteriorate along this cycle and eventually evolve into a full-scale world war. I don’t know for sure what will happen next, and I still hope that the world ultimately builds itself on a relationship of mutual gain rather than being destroyed by mutual loss. I have also been trying, in the ways I can, to push for this outcome. For example, over the past 42 years, I have maintained very good long-term relationships with senior U.S. and China policy-makers—along with some people outside the institutions. So in the past, and especially during this highly adversarial period right now, I’ve been trying to support a mutual-gain relationship in ways that both sides can accept and recognize. I do this partly because I have personal feelings for people on both sides, and partly because, obviously, a mutual-gain relationship is far better than a mutual-loss relationship. Even though it is getting harder to do so now, because some people believe, “My enemy’s friend is my enemy.”

When the “big cycle” reaches this stage—right on the eve of major war—the fundamental contradictions that cannot be resolved through compromise will often push the cycle’s links to evolve one after another, until the final outcome comes in the form of violence. Therefore, understanding this typical big-cycle structure and continuously observing what is actually happening in reality becomes extremely important. I provide you with this analytical framework with the hope that you can use it to compare with how real events unfold, see what I’m seeing, and then decide how you want to respond.

Correspondingly, I believe there is one point you especially need to see clearly: the world order has shifted from one led by the United States and its allies (such as the G7), based on multilateral rules, to a world without a single dominant force to maintain order—one that follows “might makes right” more often. This means we are very likely to see more conflicts. Anyone who seriously studies history will recognize that today’s world order is closer to the state of most periods before 1945 than it is to the postwar order we are familiar with—and what lies behind that is extremely significant.

4、As history has repeatedly shown, judging which country is more likely to win is not most reliably determined by who is stronger, but by who can endure suffering longer.

This is clearly also one of the key variables in the Iran war. The U.S. president assures the American public that this war will end within a few weeks, at which point oil prices will fall and life will return to its original state of normalcy and prosperity. But whether a country can endure suffering over the long term depends on many observable indicators, such as public approval ratings (especially in democratic countries), and the ability of government leaders to maintain control (especially in authoritarian regimes where public opinion constraints are weaker).

In war, victory does not arrive automatically when the enemy is weakened. Victory only appears when the other side surrenders. Because you cannot destroy all enemies. In the Korean War, China reportedly joined the fight when its own strength was far weaker than the United States’ and when the United States had nuclear weapons; it is said Mao Zedong once made a remark: “They can’t kill us all.” The meaning is simple: as long as there are still people who continue fighting, the enemy cannot truly win the war. The lessons of Vietnam, Iraq, and Afghanistan have already been very clear. True victory is when the victorious side is able to extricate itself and ensure the losing side is no longer a threat. The United States still looks like the strongest country in the world, but it is also the most overextended great power, and among the major powers, it is the most vulnerable in the ability to endure suffering over the long term.

5、All of this is unfolding in a typical “big cycle” way.

By “typical big-cycle mode,” we mean that events are mainly driven by five major forces: big-cycle fluctuations between monetary order and disorder for money, debt, and the economy; the breakdown of political and social order triggered by wealth gaps and value splits; the breakdown of regional and world order also triggered by wealth gaps and value splits; major technological advances that are used simultaneously for peaceful and wartime purposes—along with accompanying financial bubbles, which usually eventually burst; and natural events like droughts, floods, and pandemics.

I don’t want to elaborate further here to explain in detail how the “big cycle” operates, how these five major forces drive change, and the 18 deeper underlying decision factors behind them. But I still suggest you understand this framework, and I also recommend that you read my book—or the YouTube video of the same name: Principles for Dealing with the Changing World Order.

6、Having a good set of indicator system—and continuously tracking them—has huge value.

Many of the indicators I use to track these evolving situations have already been explained in Principles for Dealing with the Changing World Order. I especially recommend Chapter 6, “The External Order and the Big Cycle of Disorder.” If you also want to understand investment-related changes that are almost unimaginable in peacetime, but happen frequently during wartime, I also recommend Chapter 7, “Understanding Investments in War from a Big-Cycle Perspective.” I recently shared these two chapters online, and you can read them there.

That’s my overall assessment of the big picture up to now. Because this assessment not only affects my investment decisions, but also affects how I do other things in life, I will discuss these issues further next. As mentioned earlier, there are two appendices in the text that follow: one is information about relevant alliance relationships among countries, and the other is a brief overview of current or potential major conflicts.

Appendix

Appendix 1: Relevant treaties

Listed below are the key treaties that I consider most important, including a 1-to-5 rating of the strength of the commitments they imply, as well as a brief description of each treaty. Overall, other indicators used to measure alliance relationships—such as leaders’ statements and actual actions—are broadly consistent with the relationships reflected in these treaties. However, it is becoming increasingly clear that all of these treaties, especially those involving the United States, may change, and that actual actions will ultimately weigh more than the text of agreements.

1、Key treaties of the United States：

2、Key treaties among China–Russia–Iran–North Korea：

Appendix 2: Wars that have occurred and potential wars

Listed below are the several most important wars that I think have already occurred or are potential at present, including my brief assessment of each situation, and my probability evaluation of them breaking out or escalating into military conflicts within the next five years.

War between Iran, the United States, and Israel

This is already a full-scale war, and it appears to still be escalating, with all sides continuously consuming resources. Variables that need close attention include:

a）Who ultimately controls the Strait of Hormuz, Iran’s nuclear materials, and Iran’s missiles;

b）How much in terms of personnel and financial cost each country is willing to pay to win the war;

c）How satisfied each belligerent country is with its own alliance relationships;

d）Whether Iran’s allies (such as North Korea) will directly enter the war or support Iran through arms sales, or whether a conflict will break out in Asia—thereby forcing the United States to make a choice between honoring its commitments and choosing not to act;

e）Whether peace and security can be restored in the Gulf region.

Direct war between Ukraine—NATO—Russia

This is an active war involving almost all major military powers (excluding China), and the risk is extremely high. However, over the past three years, the conflict has not expanded beyond Ukraine—this is a relatively positive signal, meaning that a larger-scale war has been temporarily avoided. Currently, Russia is fighting directly against Ukraine, while NATO provides weapon support to Ukraine at tremendous fiscal cost; at the same time, Europe’s military spending and preparations for the war against Russia are rising. Since NATO has not directly participated, and because fear of nuclear war temporarily restrains escalation, the conflict has been contained for now. Risks that need watching include: Russia attacks NATO territory or supply lines; NATO directly intervenes militarily; and accidental conflicts occur between Russia and NATO member countries. I believe the probability of these situations occurring and causing the war to expand is not high—about 30%–40% over the next five years.

Wars related to North Korea

North Korea is a highly provocative nuclear state, and it has demonstrated its willingness to fight on behalf of allies when confronting the United States. It has missiles capable of carrying nuclear warheads and striking the United States homeland (though current reliability is still limited), but over the next five years, this capability will improve significantly. North Korea has close relations with China and Russia, and it may become an effective proxy force for them. Meanwhile, North Korea is extremely aggressive in demonstrating and developing missile capabilities, but it is not inclined to sell such related weapons to other countries. I estimate the probability of some form of military conflict occurring within the next five years is 40%–50%.

Conflict in the South China Sea—Philippines—China—United States

There is a defense treaty akin to NATO between the United States and the Philippines, while China’s coast guard and the Philippines have confronted each other multiple times already; these frictions may further pull the U.S. Navy into involvement. The threshold for triggering conflict is actually low—for example, a ship collision, China attacking Philippine ships, implementing a blockade, or a missile incident. Once it happens, the United States will face pressure over whether it will fulfill its treaty obligations. However, U.S. voters may not necessarily support such military intervention, which would put U.S. leadership in an extremely difficult and highly symbolic dilemma. I believe the probability of this conflict occurring over the next five years is about 30%.

Overall, among these potential conflicts, the probability that at least one occurs within the next five years is, in my view, more than 50%.