Ray Dalio's new article: The world is sliding into a "Great Cycle" war phase

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

Original Author: Ray Dalio

Original Compilation: Peggy，BlockBeats

Editor’s Note: While the market is still repeatedly repricing short-term questions such as “How long will the conflict last?” and “How high will oil prices go?”, this article tries to pull the perspective back to a longer time horizon. Ray Dalio, the founder of Bridgewater Associates, believes that the current set of regional conflicts is stitching together what can be called a “world-class conflict” that has not yet been clearly named, and that its evolution logic is closer to the cyclical stage of the period just before major wars in history.

Through a “big cycle” perspective, the article breaks down the current situation into a series of structural changes happening in sync: realignments of blocs, escalating conflicts in trade and capital, key chokepoints being “weaponized,” multiple theaters of conflict unfolding in parallel, and the gradual strain 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 into the restructuring of global order—how it will affect ally trust, resource allocation, and strategic decisions, and then spill over into wider regions such as Asia and Europe.

Even more worthy of attention, the article repeatedly emphasizes an overlooked variable: who wins or loses the war does not depend on absolute strength, but on each side’s ability to withstand long-term attrition. This judgment shifts the analysis from “who is stronger” to “who can hold out longer,” and also places the United States in a more complicated position—it is both the most powerful country right now and the one that is “most overextended” in its global commitments.

In the author’s view, the assumptions embedded in the market today—conflict ending in the short term, and order returning to normal—may themselves be the biggest misjudgment. Historical experience shows that wars often have no clear starting point; instead, they evolve gradually out of economic, financial, and technological conflicts, and become visible 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) also point to the same issue: the real risk is not whether any single conflict breaks out, but whether these conflicts begin to interact with and reinforce each other.

As the world slides from a “rules-based order” to a “power-based order,” conflict will no longer be an exception and may become the new normal. Understanding this shift is the starting point for assessing every variable going forward.

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 also want to clarify that the picture outlined by my observations next is not one I want to come true; it is simply the picture I believe is more consistent with reality, based on the information I have and a 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’ve had to study every factor that has influenced markets over the past 500 years in order to deal with the changes constantly crashing in from all directions. In my view, most people tend to focus on and respond to the events that are most attention-grabbing in the present—for example, the situation in Iran right now—while they overlook those larger, more important forces that evolve over longer time horizons, and that is exactly what drives the current situation and determines where things will go next.

As far as the present is concerned, 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 currently in, and this war won’t end anytime soon.

Of course, what happens next with the Strait of Hormuz—especially whether control of passage will be taken from Iran, and which countries are willing to pay how large a human and financial price for that—will have extremely far-reaching impacts on the world.

In addition, there are a series of other questions that are also worth watching: 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 missions those troops will carry out; how gasoline prices will change; and the upcoming U.S. midterm elections.

All of these short-term questions matter, but they can also cause people to overlook what is truly bigger and more critical. More specifically, precisely because most people are accustomed to looking at things through a short-term lens, they now generally expect—and the market is pricing accordingly—that this war will not last long, and once the war ends, everything will return to “normal.”

But almost nobody discusses one key fact: we are in the early stage of a world war that won’t end anytime soon. Because I have a different analytical framework for understanding the situation, I want to explain why below.

Here are the major questions I believe truly need attention:

Questions worth watching

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

This may sound somewhat exaggerated, but one thing is undeniable: today we live in a highly interconnected world, and multiple hot wars are happening at the same time within it (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-weapon states. In addition, a large amount of important “non-hot wars” are unfolding in parallel as well—trade wars, economic wars, capital wars, technology wars, and struggles for geopolitical influence—and almost every country is drawn into them.

When these conflicts come together, they form a very typical form of global war, similar to what history refers to as a “world war.” For instance, past “world wars” were often also composed of multiple interconnected wars, which usually had no clear start date and no explicit declarations of war; instead, they gradually slid into war status, almost unconsciously. These past wars ultimately converged into a typical world-war dynamic mechanism, influencing one another; today’s wars are also showing the same structure.

In Chapter 6 of my book Principles for Dealing with Changing World Order: The Big Cycle of External Order and Disorder, which I published about five years ago, I already described this war dynamic mechanism in detail. If you want a more complete explanation, you can read that chapter—it discusses the evolutionary track we are experiencing now and what is likely to happen next.

2、It’s crucial to understand how each side aligns, and what relationships they have with each other

To judge objectively how each side is aligning is actually not that hard. We can see it clearly through various indicators, such as formal treaties and alliance relationships, United Nations voting records, statements by national leaders, and—more importantly—the actions they actually take. For example, you can see China and Russia standing together, and Russia in turn standing with Iran and North Korea and Cuba; and this bloc is largely opposed to the United States, Ukraine (which—together with most European countries—stands with it), Israel, the Gulf Cooperation Council countries, Japan, and Australia, among others.

These alliance relationships are essential for assessing the future position of the relevant parties. Therefore, when observing the current situation and projecting the future, they must be taken into account. For example, we can already see evidence of this bloc relationship in the actions of China and Russia at the United Nations regarding whether Iran should be allowed to open up the Strait of Hormuz.

Similarly, many people say that if the Strait of Hormuz is closed, China will be especially harmed—yet that claim is actually wrong. Because China’s mutually supportive relationship with Iran likely means that oil shipped to China can still pass through; meanwhile, China’s relationship with Russia will also ensure that China can obtain oil from Russia. In addition, China itself has many other sources of energy (coal and solar power), and it has a very large stockpile of oil—roughly enough for 90 to 120 days. One more point worth noting: China consumes 80% to 90% of Iran’s oil production, which further strengthens the power foundation in 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 economics side, 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 major treaties. The pattern they present is broadly consistent with the description I gave above. (If you’re interested in checking 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 and how my indicator framework judges the probability that they will break out or escalate within the next five years, you can refer to Appendix 2.)

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

This approach is rarely used, but it is extremely valuable for me in both the past and the present—and likely for you as well.

For example, whether you look back at several similar cases in history or reason logically, it is not difficult to see that: how the United States—the leading power in the post-1945 world order—is performing, in its war with Iran, a medium-strength country; 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—against Iran will have a major impact on what other countries, especially those in Asia and Europe, do next. That, in turn, will further and profoundly affect how the world order evolves.

These changes will unfold in ways that have repeatedly appeared in history. For instance, by studying history, it’s easy to identify those empires that overextend themselves, build indicators to measure the extent of their overextension, and see how they get damaged by that overreach. Applied to today, it naturally leads people 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 also bears global security commitments that are costly and expose vulnerabilities that are easy to exploit.

Meanwhile, history also makes it clear that overextended great powers cannot successfully fight wars on two or more fronts at the same time. This inevitably triggers outsiders’ doubts about whether the United States still has the ability to fight on another front—for example, in Asia and/or Europe.

Therefore, I naturally think further about what today’s war with Iran means for the geopolitical landscape in Asia and Europe, and what it means for the Middle East itself. For example, if problems emerge in Asia in the future to test and expose whether the United States is willing to take on challenges, I would not be surprised. And the United States would likely find it hard to respond forcefully then, because it has already made many binding commitments that tie it down in the Middle East, and because U.S. public support for the Iran war is lacking as the midterm elections approach—making it 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 how U.S.–Iran relations evolve, they may recalibrate their own judgments and behaviors, thereby driving the remaking of the world order. For instance, leaders of countries that have U.S. military bases deployed on their territory and that have long relied on U.S. security commitments are likely to draw lessons and adjust strategies based on the real experience of Middle East states that similarly rely on U.S. protection in this conflict. Likewise, countries that are near key straits, have strategic choke points, or have U.S. military bases deployed in potential conflict regions (such as Asian regions where a potential U.S.–China conflict could occur) will also closely watch the evolution of the Iran war and draw their own conclusions.

I can say with confidence that this kind of thinking is truly happening within the leadership circles of countries, and similar situations have repeatedly appeared in comparable stages of the “big cycle.” These judgments and adjustments by national leaders are part of a classic evolution pathway toward large-scale war—one that has played out again and again, and is happening now. Based on the current situation, and compared against this classic cycle of international order and conflict, I believe we have advanced to Step 9. Do you feel something similar?

Below are the approximate steps in this classic evolution pathway:

· The economic and military strength of the dominant world power begins to decline relative to a rising great power; the two sides’ power gradually converges, and they confront each other economically and militarily around their disagreements.

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

· Economic, military, and ideological alliances gradually take shape.

· Proxy wars increase.

· Fiscal pressure, deficits, and debt rise, especially in dominant countries whose fiscal expansion has already been excessive.

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

· Trade chokepoints are “weaponized.”

· Development of new forms of war technology accelerates.

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

· Within each country, demands for high loyalty to leadership increase, while opposition voices to war or other policies are suppressed—just as Lincoln quoted from the Bible: “A house divided against itself cannot stand,” especially during wartime.

· Direct military conflict breaks out among the major powers.

· To support the war, there is a significant increase in taxation, debt issuance, money printing, foreign exchange controls, capital controls, and financial repression—at times even shutting down markets. (For investment logic during wartime, see Chapter 7 of Principles for Dealing with 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 of the “big cycle” in which the monetary system, parts of 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”—a stage roughly similar to the historical points between 1913–1914 and 1938–1939. Of course, these indicators are not precise forecasts; the picture they depict and the timing are also not certain.

These indicators are more of a directional hint. History tells us that wars often have no clear beginning (unless a major military event triggers formal declarations of war, such as the assassination of Archduke Franz Ferdinand, Germany’s invasion of Poland, or the Pearl Harbor incident). Meanwhile, economic, financial, and military conflicts typically begin even before formal war breaks out. Major wars are often preceded by a range of signals, such as:

1） Arms and resource stockpiles start being consumed;

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

3） Opponent countries observe the conflict to learn each other’s strengths and weaknesses;

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

All of these factors are crucial, and the relevant indicators I have observed are already enough to keep people vigilant.

In this stage of the cycle, the typical evolution path of conflict is not de-escalation, but continuous escalation. Therefore, what happens next depends largely on the trajectory of the U.S.–Iran conflict. For example, some countries have already become more doubtful about whether the United States will honor its defense commitments; meanwhile, perceptions that nuclear weapons are capable of both defense and offense are pushing policymakers in various countries to discuss more about obtaining nuclear weapons, expanding nuclear stockpiles, and strengthening missile and anti-missile systems.

Once again, I’m not saying that the situation will necessarily keep deteriorating through this cycle, ultimately evolving into a full-scale world war. I don’t know exactly what will happen next, and I still hope that the world ultimately builds relationships based on mutual win, rather than being destroyed by mutual loss. I’ve also been trying, in the ways I can, to push toward that result. For example, over the past 42 years, I’ve maintained very good long-term relationships with senior policymakers in both China and the United States—as well as some people outside the institutions. As it has been in the past, especially in the current highly confrontational period, I’ve been trying to support a mutual win relationship in ways that both sides can accept and recognize. I do this partly because I have feelings for people on both sides, and partly because mutual win is obviously far better than mutual loss. Even so, it’s becoming increasingly difficult, because some people believe, “My enemy’s friend is my enemy.”

When the “big cycle” reaches this stage—just before a great war breaks out—the fundamental contradictions that cannot be resolved through compromise often drive the cycle forward step by step, until it ends in violence. That is why it becomes very important to understand this classic big-cycle structure, and to continuously observe what is actually happening in the real world. I provide you with this analytical framework so that you can compare it with how real events unfold, see what I see, and then decide how you want to respond.

Correspondingly, I believe one thing especially needs to be clear: the world order has shifted from one dominated by the United States and its allies (for example, the G7), based on multilateral rules, to a world without a single dominant force maintaining order, where more people follow “might makes right.” This means we are very likely to see more conflicts. Anyone who seriously studies history will realize that today’s world order is closer to the state of most periods in history before 1945 than to the postwar order we are familiar with—and the implications behind that are 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 pain for longer

This is clearly one of the key variables in the Iran–U.S. war as well. The U.S. president assures the American public that the war will end in a few weeks, with oil prices falling and life returning to its original normal and prosperity. But whether a country can endure pain for a long time is actually determined by many observable indicators, such as public approval ratings (especially in democracies), 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 has been weakened; victory comes only when the other side surrenders. Because you cannot eliminate every enemy. During the Korean War, China is said to have joined in despite being far weaker than the United States and with the U.S. possessing nuclear weapons. It is said that Mao Zedong once said something: “They can’t wipe us all out.” The meaning is simple: as long as someone keeps fighting, the enemy cannot truly win the war. The lessons of Vietnam, Iraq, and Afghanistan are already very clear. True victory is for the victorious side to be able to extricate itself and ensure that the defeated side is no longer a threat. The United States still appears to be the strongest country in the world, but it is also an overextended great power, and among the major powers, it is the most vulnerable in the ability to endure pain over the long term.

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

By “a typical big cycle way,” I mean that events are driven mainly by five major forces: the big-cycle fluctuations between monetary order and disorder in terms of money, debt, and the economy; the breakdown of political and social order triggered by wealth gaps and value divisions; the breakdown of regional and global order triggered by wealth gaps and value divisions; major technological advances that are used for both peace and war purposes, along with the financial bubbles that come with them—bubbles that typically eventually burst; and natural events such as droughts, floods, and pandemics.

I don’t want to get into a more complicated explanation here to detail how the “big cycle” works, how these five forces drive changes, and the 18 deeper underlying determinants behind them. But I still recommend that you understand this framework, and I also recommend that you look at my book—or the YouTube video with the same name: Principles for Dealing with Changing World Order.

6、Having a good set of indicators and continuously tracking them is extremely valuable

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

That’s my overall assessment of the big picture as of now. Because this set of judgments not only affects my investment decisions, but also affects how I go about other aspects of life, I will talk more about these issues next. As mentioned earlier, there are two appendices attached after the main text: one about information on relevant alliance relationships among countries, and the other a brief overview of major conflicts that already exist or could potentially emerge.

Appendix

Appendix 1: Relevant Treaties

The following lists some of the most important treaties that I believe matter, including a 1-to-5 rating of the strength of the implied commitments they carry, 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 also becoming increasingly clear that all these treaties, especially those involving the United States, can change, and that actual actions ultimately carry more weight than the text of the agreements.

1、Key U.S. treaties：

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

Appendix 2: Wars That Have Occurred and Potential Wars

The following lists several of the most important wars that have occurred or could occur in the future that I believe are most important right now, including my brief judgments about their situations and probability estimates of breaking out or escalating into military conflicts within the next five years.

Iran—United States—Israel war

This is already a full-scale war, and it still appears to be escalating, with all sides continuing to consume resources. Key variables to focus on include:

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

b） How large a human and financial cost each country is willing to pay to win the war;

c） Each belligerent’s level of satisfaction 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 conflicts will erupt in Asia—thereby forcing the United States to make a tradeoff between honoring its commitments and choosing to do nothing;

e） Whether the Gulf region can restore peace and security.

Ukraine—NATO—Russia direct war

This is an existing war involving almost all major military powers (except China), and the risk is extremely high. However, over the past three years, the conflict has not expanded beyond Ukraine, which is a relatively positive signal, meaning a larger-scale war has been avoided for now. Currently, Russia is fighting directly against Ukraine, NATO provides weapons support to Ukraine at tremendous fiscal cost, and Europe’s defense spending and readiness for the war against Russia are rising. Since NATO has not directly entered the war, and because fears of nuclear war have, for now, contained escalation, the conflict has not spread further. Key risk signals to watch include: Russia attacking NATO territory or supply lines, NATO directly intervening militarily, and accidental conflicts between Russia and NATO member states. I believe the probability that these situations occur and lead to the war expanding is not high, and in the next five years it is roughly 30%–40%.

War related to North Korea

North Korea is a highly provocative nuclear state and has shown willingness to fight alongside allies in its confrontation with the United States. It has missiles capable of carrying nuclear warheads and striking the U.S. homeland (though current reliability is still limited), but within the next five years this capability will increase significantly. North Korea has close relations with China and Russia, and it could become an effective proxy force for them. At the same time, North Korea has been extremely aggressive in demonstrating and developing missile capabilities, but it does not tend to sell such weapons to other countries. I believe the probability that some form of military conflict will occur within the next five years is 40%–50%.

South China Sea—Philippines—China—United States conflict

There is a defense treaty of a similar kind between the United States and the Philippines, and meanwhile China’s coast guard and the Philippines have already had multiple standoffs. These frictions may further pull in U.S. Navy patrols. The threshold to trigger conflict is actually low—for example, ship collisions, China attacking Philippine vessels, implementing a blockade, or missile incidents. Once it happens, the United States will face pressure about whether to honor its treaty obligations. However, U.S. domestic voters may not necessarily support such military intervention, which would put U.S. leadership in an extremely difficult and highly symbolic decision. I believe the probability of this conflict occurring within the next five years is about 30%.

Overall, among these potential conflicts, the probability that at least one will occur within the next five years is, in my view, above 50%.

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