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

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Original headline: The Big Thing: We Are In A World War That Isn』t Going To End Anytime Soon

Original author: Ray Dalio

Original translation: Peggy，BlockBeats

Editor’s note: While the market keeps pricing these short-term questions—“How long will the conflict last?” “Where will oil prices go?”—this article tries to pull the perspective back to a much longer time horizon. Bridgewater Fund founder Ray Dalio believes that a series of ongoing regional conflicts is coming together into a “world-class conflict” that has not yet been clearly named, and that its pattern of evolution is closer to the cyclical stage seen on the eve of major wars in history.

Through a “big cycle” lens, the article breaks down the current situation into a set of structural changes happening in sync: shifting realignments of camps, escalating conflicts over trade and capital, key corridors being “weaponized,” simultaneous fighting across multiple theaters, and growing pressure on domestic politics and financial systems. Within this framework, the Iran–U.S. conflict is no longer just a Middle East issue; it becomes a window for observing the reshaping of the global order—how it will affect alliance trust, resource allocation, and strategic decision-making, and then spill over into broader regions such as Asia and Europe.

What’s even more worth paying attention to is that the article repeatedly emphasizes a variable that is being overlooked: the outcome of war does not depend on absolute strength, but on each side’s ability to endure long-term attrition. This view shifts analysis from “who is stronger” to “who can last longer,” and it places the United States in an even more complex position—it is both the most powerful country today and also the one that is most “overextended” in its global commitments.

In the author’s view, the assumptions the market is currently embedding—conflict ends in the short term, and order returns to normal—may themselves be the biggest misjudgment. Historical experience shows that wars often have no clear beginning; instead, they gradually evolve out of economic, financial, and technological conflicts, and then show up across multiple regions at the same time. The potential conflict paths listed in the appendix (the Middle East, Russia–Ukraine, the Korean Peninsula, the South China Sea) point to the same issue as well: the real risk is not whether any single conflict breaks out, but whether these conflicts begin to interact with—and link up with—each other.

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

Below is the original text:

I want to start by wishing you all the best during this challenging period. At the same time, I also want to explain that the picture outlined by these observations that follow is not one that I hope will come true; it is simply the picture I believe is closer to reality, based on the information I have and the series of indicators I use to assess objective reality.

As an investor who has worked in global macro investing for more than 50 years, I have had to study every factor that has affected markets over the past 500 years in order to deal with the constant stream of changes coming at us. In my view, most people tend to focus on—and respond to—the most attention-grabbing events of the moment, such as the situation in Iran today, while overlooking the larger, more important forces that are unfolding over the longer term. And what truly drives today’s situation and determines where the future will go are precisely these factors.

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 won’t end anytime soon.

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

In addition, there is a whole series of questions that are also worth watching closely: whether Iran still has the capability to threaten neighboring countries with missiles and nuclear weapons; how many troops the United States will send and what missions 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 can also cause people to overlook the truly larger, more critical issues. More specifically, precisely because most people are accustomed to thinking in the short term, they now generally expect—what the market is pricing accordingly—that this war won’t last long, and after the war ends everything will return to “normal.”

But almost nobody is discussing one fact: we are in the early stages of a world war that is not going to end anytime soon. Because I have a different framework for judging the situation, I want to explain the reasons below.

Here are the major issues I believe truly need attention:

Questions worth paying attention to

1、We are in a world war that won’t end anytime soon.

This may sound somewhat exaggerated, but one thing is undeniable: we are living in a highly interconnected world, and in this world multiple hot wars are happening at the same time (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-armed countries. In addition, many important “non-hot wars” are also occurring in parallel—trade wars, economic wars, capital wars, technology wars, and competition for geopolitical influence—while nearly all countries are pulled into these conflicts.

All these conflicts together form a very typical kind of global war, similar to historical “world wars.” For example, past “world wars” were typically also composed of multiple interrelated wars; they often had no clear start date and no formal declaration of war, but instead slipped step by step into a war footing without people necessarily realizing it at the time. Those wars ultimately coalesced into a typical world-war dynamic mechanism, influencing one another; today’s wars are showing the same structural pattern.

In Chapter 6 of my book Principles for Dealing with a Changing World Order, titled “The Big Cycles of External Order and Disorder,” published about five years ago, I have already described this war dynamic mechanism in detail. If you want a more complete explanation, you can read that chapter—it discusses the evolution path we are experiencing now, and what will likely happen next.

2、Understanding how each side forms alliances—how the camps relate to one another—is extremely important.

It’s actually not hard to objectively judge how the various sides are aligning. You can see it clearly through various indicators—for example, formal treaties and alliance relationships, United Nations voting records, statements by leaders of different countries, and the actions they actually take.

For example, you can see that China and Russia are on the same side, and Russia is also aligned with Iran, North Korea, and Cuba; and this group of forces, broadly, is opposed to the United States, Ukraine (the latter is aligned with most European countries), Israel, the Gulf Cooperation Council countries, Japan, and Australia.

These alliance relationships are crucial for judging the future position of the relevant parties. Therefore, when observing today’s situation and projecting the future, we must incorporate them into our considerations. For example, we can already see the manifestation of these camp dynamics in the actions taken by China and Russia at the United Nations regarding whether Iran should be allowed to open up the Strait of Hormuz.

For another example, many people say that once the Strait of Hormuz is closed, China will be particularly harmed—this is actually not correct. Because the relationship of mutual support between China and Iran may still allow the oil shipped to China to pass through;

At the same time, China’s relationship with Russia would also ensure that China can obtain oil from Russia. On top of that, China itself has a large number of other energy sources (coal and solar power), and it has a massive oil reserve stockpile—roughly enough to cover 90 to 120 days. Another point worth noting is that 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 the relative economic and geopolitical winners. As for the oil and energy economic dimension, the United States is in a relatively favorable position, because it is itself an energy exporter—which is a significant advantage.

There are many ways to measure these alliance relationships, including United Nations voting records, economic ties, and key treaties. The patterns they present are basically consistent with what I described above. (If you’re interested in looking up these representative major treaties, you can refer to Appendix 1.

Similarly, if you want to understand the major wars that already exist or may occur now, and how my indicator framework judges their probability of happening or escalating within the next five years, you can refer to Appendix 2.)

3、Researching historical similar cases and comparing them with today’s situation

This method is rarely used, but it has been extremely valuable for me in the past and now, and it may be valuable for you as well.

For example, whether you look back at several similar cases in history or reason logically, it’s not hard to see that: how the United States—dominant power in the post-1945 world order—performs in a war against Iran, a mid-level power; how much money and military equipment it will spend and consume; and to what extent it protects or fails to protect its allies—will be closely watched by other countries, and these observations will greatly influence how the world order changes in the future.

Most importantly, we know that the outcome of the war between the United States—Israel—and, now, the Gulf Cooperation Council countries—on the one hand—and Iran—on the other—will have a major impact on what other countries, especially those in Asia and Europe, will do next. This will then further deeply affect how the world order will evolve.

These changes will unfold in ways that have recurred repeatedly in history. For instance, by studying history, it’s easy to identify empires that have become overextended, build indicators to measure how overextended they have become, and see how they suffer damage from overextension. Applied to today, it’s only natural to look at what the United States is doing: the United States currently has 750 to 800 military bases in 70 to 80 countries (by the way, China has only 1), and it bears security commitments across the globe that are costly and extremely vulnerable to being exposed.

At the same time, history also tells us clearly that overextended great powers cannot successfully fight wars on two or more fronts at the same time. This inevitably raises doubts externally about whether the United States still has the capacity to fight on another front—such as in Asia and/or Europe.

Therefore, I naturally think further about what the current war with Iran means for the geopolitical landscape of Asia and Europe, and what it means for the Middle East itself. For example, if in the future some issues emerge in Asia to test and expose whether the United States is willing to take on challenges, I would not be surprised.

And at that time, the United States would have a hard time mounting a strong response, because it has already made a large number of binding commitments in the Middle East, and in addition, with U.S. public support lacking for the war with Iran as the midterm elections approach, it would look very unrealistic for it to fight another war on a different front.

This kind of dynamic can lead to an outcome: as other countries observe the evolution of U.S.–Iran relations, they will readjust their judgments and behavior, thereby pushing the remaking of the world order. For example, the leaders of countries that station U.S. military bases and have long relied on U.S. security commitments are very 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 that are near key straits, have strategic choke points, or have deployed U.S. military bases in potential conflict regions (for example, Asian regions where a possible U.S.–China conflict could break out) will also closely watch how the Iran war unfolds and draw their own conclusions.

I can say with confidence that this kind of thinking is genuinely happening within the leadership circles of countries, and similar situations have appeared many times in similar stages of the “big cycle.” These leadership judgments and adjustments are part of a classic evolutionary path toward large-scale war—this process has repeatedly played out, and it is happening now as well.

Combining today’s situation with the classic international order and conflict cycle, I believe we have moved to Step 9. Do you also have a similar feeling?

Below are the approximate steps of this classic evolutionary path:

· The economic and military strength of the leading world power declines relative to a rising great power; the two sides’ power gradually converges, and they begin to confront each other economically and militarily around points of disagreement.

· Economic warfare escalates significantly, taking the form of sanctions and trade blockades.

· Economic, military, and ideological alliances gradually form.

· Proxy wars increase.

· Fiscal pressure, deficits, and debt rise—especially in leading countries whose fiscal expansion has already become excessive.

· Key industries and supply chains gradually come under government control.

· Trade choke points are “weaponized.”

· Development of new war technologies accelerates.

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

· Within countries, demands for leaders to maintain high loyalty increase, and voices opposing the anti-war stance or other policies are suppressed—just as Lincoln, quoting the Bible, said: “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 significantly; in some cases, markets may even be closed. (For investment logic during wartime, see Chapter 7 of Principles for Dealing with a Changing World Order.)

· Ultimately, one side defeats the other, establishes a new order, and the winning side takes the lead in designing it.

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

These signals suggest that we are in a period transitioning from the “pre-conflict phase” to the “conflict phase,” roughly similar to historical time points between 1913–1914 and 1938–1939. Of course, these indicators are not precise predictions; the picture they draw and the timing are also not deterministic.

These indicators are more like directional prompts. History tells us that wars often have no clear starting point (unless triggered by major military events such as the assassination of Archduke Franz Ferdinand, the German invasion of Poland, or the Pearl Harbor incident, which formally triggered declarations of war), while economic, financial, and military conflicts typically begin before the official outbreak of war. Major wars are often preceded by a series of signals, such as:

1）Armament and resource stockpiles begin to be consumed;

2）Fiscal spending, debt, money injections, and capital controls continue to rise;

3）Rival states observe the conflict, learning each other’s strengths and weaknesses;

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

All these factors are crucial, and the indicators I have observed are already enough to keep people on high alert.

During this phase of the cycle, the typical evolution path of conflicts is not de-escalation, but continuous escalation. Therefore, what happens next depends largely on how the U.S.–Iran conflict develops. For example, there are already some countries that have more doubts about whether the United States will honor its defense commitments; at the same time, the understanding that nuclear weapons have both defensive and offensive capabilities is pushing policymakers in more countries to discuss getting nuclear weapons, expanding nuclear stockpiles, and strengthening missile and missile-defense systems.

Once again, I’m not saying that the situation will inevitably worsen along this cycle until it evolves into a full-scale world war. I don’t know for sure what will happen next, and I still hope that in the end, the world will be built on win-win relationships—not destroyed by win-lose ones.

I have also been trying, in the ways within my capacity, to push for this outcome. For example, over the past 42 years, I have maintained very strong long-term relationships with senior policy makers in China and the United States—and with some people outside the establishment. So in the past, and especially in the highly adversarial period we are in now, I have continued to try to support a win-win relationship in ways that both sides can accept and recognize.

The reason I do so is partly because I have genuine personal regard for people on both sides; and partly because win-win relationships are obviously far better than win-lose ones. Even though doing this is getting harder now, because some people believe that “the friend of my enemy is my enemy.”

As the “big cycle” reaches this stage—right before the outbreak of a major war—fundamental contradictions that cannot be resolved through compromise tend to push the cycle forward link by link until it ends in violence.

That’s why it becomes very important to understand this typical structure of the big cycle and to keep watching what is actually happening in the real world. I provide this analytical framework to you so that you can compare it against the unfolding of real events, see what I am seeing, and then decide how you want to respond yourself.

Correspondingly, I believe there is one point that especially needs to be seen 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 one without a single dominant power to maintain order, and one that follows “might makes right” more often.

This means we will likely see more conflict. Anyone who seriously studies history will realize that today’s world order is closer to most of the periods before 1945 in history than to the postwar order we are familiar with; and the implications behind that are very 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 bear suffering for longer.

This point is clearly also a key variable in the war between the U.S. and Iran. The U.S. president assures the American public that the war will end within a few weeks, oil prices will fall, and life will return to its original normal and prosperity. But whether a country can endure suffering for the long term actually has many observable indicators, such as public approval ratings (especially in democracies), and the ability of government leaders to maintain control (especially in authoritarian systems where public opinion constraints are weaker).

In war, victory does not automatically arrive when the enemy has been weakened; victory only appears when the opponent surrenders. Because you cannot eliminate all enemies. In the Korean War, when China entered the war despite being far weaker than the United States and the U.S. having nuclear weapons, it’s said that Mao Zedong once said something: “They can’t kill us all.” The meaning is very simple: as long as people keep fighting, the enemy cannot truly win the war.

The lessons from Vietnam, Iraq, and Afghanistan are already very clear. Real victory is when the winning side can extricate itself and ensure the losing side no longer poses a threat. The United States still looks like the most powerful country in the world, but it is also the most overextended great power, and among the major powers, it is the most vulnerable in terms of enduring suffering over the long term.

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

What is meant by a “typical big cycle way” is that events are primarily driven by five major forces: the big-cycle oscillations of money, debt, and the economy between monetary order and monetary disorder; the breakdown of political and social order caused by wealth gaps and value divisions; the breakdown of regional and global order caused by wealth gaps and value divisions; major technological progress that is used simultaneously for peaceful and wartime purposes, along with the financial bubbles that come with it—which bubbles usually end up bursting; natural events such as droughts, floods, and pandemics.

I don’t want to expand on this more complicatedly here, to explain in detail how the big cycle works, how these five forces drive change, and what the 18 deeper underlying determinants behind them are. But I still suggest that you understand this framework, and also read my book—or the YouTube video of the same name: Principles for Dealing with a Changing World Order.

6、Having a good set of indicators, and continuously tracking them, is hugely valuable.

Many indicators that I use to track the evolution of these situations have already been described in Principles for Dealing with a Changing World Order. I especially recommend Chapter 6, “The Big Cycles of External Order and Disorder.”

If you also want to understand those investment-related changes that are almost unimaginable in peacetime but often occur during wartime, I recommend Chapter 7, “Understanding Investment in War from the Big Cycle Perspective.” I recently shared these two chapters online, where you can read them.

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

Appendix

Appendix 1: Relevant treaties

Listed below are some of the most important treaties I believe, including a 1-to-5 rating of the strength of the implicit commitments they contain, as well as a brief explanation of each treaty. Overall, the indicators used to measure alliance relationships—such as leaders’ statements and actual actions—are generally consistent with the relationships reflected in these treaties. However, it is also becoming increasingly clear now that all these treaties, especially those involving the United States, can change, and that real action ultimately carries more weight than the text of agreements itself.

1、Key treaties of the United States:

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

Appendix 2: Wars that have happened and potential wars

Listed below are the few wars I consider currently most important that have already happened or may be potential, including my brief assessment of the situation and an evaluation of the probability that they will break out or escalate 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 be still escalating, with all sides continuously consuming resources. Key variables to focus on include: a) who ultimately controls the Strait of Hormuz, Iran’s nuclear materials, and Iran’s missiles; b) how much personnel and fiscal cost each country is willing to pay in order to win the war; c) the participating countries’ satisfaction with their 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—forcing the United States into the difficult choice between honoring its commitments and choosing to do nothing; e) whether peace and security can be restored in the Gulf region.

Direct war among Ukraine, NATO, and Russia This is a current war involving almost all major military powers (except China), and the risk is extremely high. However, over the three years of conflict, it has not expanded beyond Ukraine, which is a relatively positive signal, meaning that a larger-scale war has been temporarily avoided. Currently, Russia is fighting directly against Ukraine, NATO is supporting Ukraine with weapons at huge fiscal cost, and Europe’s defense spending and war readiness against Russia are rising.

NATO not directly participating, and the fear of nuclear war, have temporarily contained escalation. Risk signals to watch include: Russia attacks NATO territory or supply lines, NATO directly intervenes militarily, and accidental conflicts occur between Russia and NATO member states. I think the probability of these situations occurring and leading to the expansion of the war is not high, and over the next five years it is roughly 30%–40%.

North Korea-related war North Korea is a highly provocative nuclear state and has shown its willingness to fight alongside allies against the United States. It has missiles capable of carrying nuclear warheads and striking the U.S. homeland (although reliability is still limited currently), but over the next five years this capability will increase significantly.

North Korea has close ties with China and Russia and may become an effective proxy force for them. At the same time, North Korea is extremely aggressive in demonstrating and developing missile capabilities, but it is not inclined to sell related weapons to other countries. I believe the probability of some form of military conflict occurring within the next five years is 40%–50%.

Conflict in the South China Sea involving the Philippines, China, and the United States The United States has a defense treaty with the Philippines similar to NATO, and Chinese coast guard forces and the Philippines have had repeated stand-offs. These frictions may further involve the U.S. Navy in巡航. The threshold for triggering a 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 at home may not necessarily support such military intervention, which would put U.S. leadership in an extremely difficult and highly symbolic choice. I think the probability of this conflict occurring within the next five years is about 30%.

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