Ray Dalio’s New Article: The World Is Sliding Toward the “Big Cycle” War Phase

Original Author: Ray Dalio

Original Compilation: Peggy, BlockBeats

Editor’s Note: While the market continues to price in short-term questions like “how long will the conflict last” and “how high will oil prices go,” this article attempts to pull the perspective back to a longer time scale. Ray Dalio, founder of Bridgewater Associates, believes that the current series of regional conflicts are piecing together into a “world-class conflict” that has yet to be explicitly named, and its evolutionary logic more closely resembles the cyclical stages on the eve of major wars in history.

Through the lens of the “Big Cycle,” the article deconstructs the current situation into a series of structural changes occurring simultaneously: realignment of blocs, escalation of trade and capital conflicts, “weaponization” of key chokepoints, multi-theater conflicts unfolding in parallel, and the gradual strain on domestic political and financial systems. Within this framework, the US-Iran conflict is no longer just a Middle Eastern issue but becomes a window into observing the restructuring of the global order—how it will affect ally trust, resource allocation, and strategic decisions, subsequently spilling over into broader regions like Asia and Europe.

More notably, the article repeatedly emphasizes a neglected variable: victory in war does not depend on absolute strength, but on each side’s ability to endure prolonged attrition. This judgment shifts the analysis from “who is stronger” to “who can last longer,” also placing the United States in a more complex position—it is currently the most powerful nation, yet also the most “overextended” in its global commitments.

In the author’s view, the market’s current implicit assumption—that the conflict will end soon and order will return to normal—may itself be the biggest miscalculation. Historical experience shows that wars often have no clear starting point; they gradually evolve from economic, financial, and technological conflicts and manifest simultaneously in multiple regions. The potential conflict paths listed in the appendix (Middle East, Russia-Ukraine, Korean Peninsula, South China Sea) also point to the same question: the real risk lies not in whether a particular conflict erupts, but in whether these conflicts begin to interconnect.

As the world slides from a “rules-based order” to a “might-makes-right order,” conflict may no longer be the exception but could become the new normal. Understanding this shift is the starting point for judging all future variables.

The following is the original text:

I want to first wish you well during this challenging time. I also want to make clear that the picture painted by the following observations is not one I hope comes true; it is simply the picture I believe is closer to reality based on the information I have and the set of metrics I use to objectively assess reality.

As an investor who has been engaged in global macro investing for over 50 years, I have had to study all the factors affecting markets over the past 500 years in order to cope with the constant barrage of changes. In my view, most people tend to focus on and react only to the most attention-grabbing events of the moment—like the situation in Iran now—while overlooking the larger, more important, longer-evolving forces that are actually driving the current situation and determining the future.

For now, the most important point is this: the war between the US, Israel, and Iran is just one part of the world war we are in, and this war will not end soon.

Of course, what happens next in the Strait of Hormuz—especially whether control over its passage is wrested from Iran, and which countries are willing to pay what human and financial price for it—will have extremely profound global implications.

Additionally, a series of other questions are also worth watching: whether Iran retains the capability to threaten and harm neighboring countries with missiles and nuclear weapons; how many troops the US will send and what missions they will perform; how gasoline prices will change; and the upcoming US midterm elections.

All these short-term questions are important, but they also cause people to overlook what is truly larger and more critical. More specifically, precisely because most people are accustomed to viewing things with a short-term perspective, the prevailing expectation now—and what the market is pricing in—is that this war will not last long, and once it’s over, everything will return to “normal.”

But almost no one is discussing the fact that we are in the early stages 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 big questions I believe truly need attention:

Questions Worth Watching

1. We Are in a World War That Will Not End Soon

This may sound exaggerated, but one thing is undeniable: we now live in a highly interconnected world where multiple hot wars are occurring simultaneously (e.g., the Russia-Ukraine—Europe—US war; the Israel—Gaza—Lebanon—Syria war; the Yemen—Sudan—Saudi Arabia—UAE war, also involving Kuwait, Egypt, Jordan, and other related countries; and the US—Israel—GCC countries—Iran war). Most of these wars involve major nuclear powers. Furthermore, a significant number of important “non-hot wars” are also happening concurrently—namely trade wars, economic wars, capital wars, technology wars, and geopolitical influence struggles—and almost all countries are caught up in them.

Taken together, these conflicts constitute a very typical global war similar to “world wars” in history. For example, past “world wars” were also typically composed of interconnected multiple wars; they often had no clear start date or formal declaration of war, but rather slipped into a state of war step by step, imperceptibly. These past wars eventually converged into a typical world war dynamic mechanism, influencing each other; the current wars are showing the same structure.

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

2. Understanding How the Sides Are Aligning and Their Relationships Is Very Important

Objectively judging how the sides are aligning is actually not difficult. We can see it clearly through various metrics, such as formal treaties and alliance relationships, UN voting records, statements by national leaders, and the actions they actually take. For example, you can see China aligning with Russia, and Russia aligning with Iran, North Korea, and Cuba; and this group of forces is largely opposed to the US, Ukraine (which aligns with most European countries), Israel, GCC countries, Japan, Australia, and others.

These alliance relationships are crucial for judging the future situation of the relevant parties, so they must be taken into account when observing the current situation and projecting the future. For instance, we can already see the manifestation of this bloc relationship in the actions of China and Russia at the UN regarding the issue of whether Iran should open the Strait of Hormuz.

Furthermore, many people say China would be particularly hurt if the Strait of Hormuz were closed, but this is actually incorrect. Because the mutually supportive relationship between China and Iran would likely allow oil destined for China to still pass through; meanwhile, China’s relationship with Russia would also ensure China can obtain oil from Russia. Beyond that, China itself has many other energy sources (coal and solar) and possesses a large-scale oil inventory, sufficient for about 90 to 120 days of use. Another point worth noting: China consumes 80% to 90% of Iran’s oil production, further strengthening the power basis in the China-Iran relationship. Overall, in this war, China and Russia seem to be relative economic and geopolitical winners. As for the oil and energy economy, the US is in a relatively advantageous position because it is itself an energy exporter, which is quite an advantage.

There are many ways to measure these alliance relationships, including UN voting records, economic ties, and important treaties. The patterns they present are largely consistent with my description above. (If you are interested in viewing these representative major treaties, you can refer to Appendix 1. Similarly, if you want to understand the major wars that currently exist or may occur, and how my indicator system judges their probability of occurring or escalating within the next five years, you can refer to Appendix 2.)

3. Study Historical Similar Cases and Compare Them with the Current Situation

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

For example, whether looking back at several similar cases in history or reasoning logically, it is not difficult to see: how the US—the dominant power in the world order since 1945—performs in a war with Iran, a medium power; how much money and military equipment it will spend and deplete; and to what extent it protects or fails to protect its allies, will be closely observed 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 this war between the US—Israel—and now GCC countries—and Iran will have a significant impact on what other countries, especially in Asia and Europe, do next, which will in turn profoundly affect how the world order evolves.

These changes will unfold in ways that have repeatedly occurred in history. For instance, by studying history, we can easily identify overextended empires, establish metrics to measure their degree of overextension, and see how they suffer from it. In the present context, it is natural to look at what is happening in the US: the US now has 750 to 800 military bases in 70 to 80 countries (by the way, China has only 1) and bears costly and highly vulnerable security commitments all over the world.

At the same time, history also clearly tells us that overextended great powers cannot successfully fight wars on two or more fronts simultaneously, which inevitably raises doubts about whether the US still has the capacity to fight on another front—for example, in Asia and/or Europe.

Therefore, I naturally think further: what does the current war with Iran mean for the geopolitical landscape in Asia and Europe, and what does it mean for the Middle East itself. For example, I would not be surprised if certain issues arise in Asia in the future to test and expose whether the US is willing to meet the challenge. And the US will find it difficult to respond forcefully then, because it is already heavily committed in the Middle East with tying-down commitments, coupled with the lack of domestic public support for the Iran war as midterm elections approach, making it seem very unrealistic to fight another war on another front.

This dynamic could lead to an outcome: other countries, in observing the evolution of US-Iran relations, will recalibrate their own judgments and behaviors, thereby driving the reshaping of the world order. For example, leaders of countries that host US military bases and have long relied on US security commitments are likely to learn lessons and adjust strategies based on the actual experiences of those similarly dependent on US protection in the Middle East during this conflict. Similarly, countries located near key strategic straits, or those with US bases deployed in potential conflict zones (e.g., areas in Asia where a China-US conflict might erupt), will also closely watch the development of the Iran war and draw their own conclusions.

I can say with certainty that this kind of thinking is genuinely happening among national leaderships, and similar situations have occurred many times in similar stages of the “Big Cycle.” These judgments and adjustments by national leaders are part of a classic evolutionary path toward large-scale war—a process that has repeated itself and is now happening again. Considering the current situation and comparing it with this classic cycle of international order and conflict, I believe we have progressed to step 9. Do you feel the same?

Below are the approximate steps of this classic evolutionary path:

· The economic and military strength of the dominant world power begins to decline relative to rising powers, their forces gradually converge, and they engage in confrontation over differences at economic and military levels.

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

· Economic, military, and ideological alliances gradually form.

· Proxy wars increase.

· Fiscal pressures, deficits, and debts rise, especially more pronounced in those dominant countries already fiscally overextended.

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

· Trade chokepoints are “weaponized.”

· New war technologies accelerate development.

· Multi-theater conflicts begin to occur simultaneously.

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

· Direct military conflict erupts between major powers.

· To support the war, taxes, debt issuance, money printing, foreign exchange controls, capital controls, and financial repression increase significantly, and in some cases markets may even be closed. (For investment logic during wartime, refer to Chapter 7 of *Principles for Dealing with the Changing World Order*.)

· Finally, one side defeats the other, establishes a new order, and designs it under the victor’s leadership.

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

These signals indicate we are in a transition period from the “pre-conflict stage” to the “conflict stage,” roughly similar to historical points between 1913–1914 and 1938–1939. Of course, these indicators are not precise predictions; the picture they paint and the timing are not deterministic.

These indicators are more directional cues. History tells us that wars often have no clear starting point (unless triggered by major military events like the assassination of Archduke Ferdinand, Germany’s invasion of Poland, or Pearl Harbor leading to formal declarations of war), while economic, financial, and military conflicts usually unfold before formal war breaks out. Major wars are often foreshadowed by a series of signals, such as:

1) Depletion of armaments and resource reserves begins;

2) Fiscal spending, debt, money printing, and capital controls continuously rise;

3) Adversarial countries learn each other’s strengths and weaknesses by observing conflicts;

4) Overextended dominant powers are forced to deal with dispersed, distant multi-front conflicts.

These factors are all crucial, and the relevant indicators I observe are already sufficient to warrant vigilance.

In this stage of the cycle, the typical evolutionary path of conflict is not de-escalation but continuous escalation. Therefore, what happens next depends largely on the direction of the US-Iran conflict. For instance, some countries have already developed more doubts about whether the US will honor its defense commitments; meanwhile, the recognition that nuclear weapons possess both defensive and offensive capabilities is driving policymakers in various countries to discuss more about acquiring nuclear weapons, expanding nuclear stockpiles, and strengthening missile and anti-missile systems.

Again, I am not saying the situation will definitely continue to worsen along this cycle, eventually evolving into a full-scale world war. I do not know what will definitely happen next, and I still hope the world ultimately builds on win-win relationships rather than being destroyed by lose-lose relationships. I have also been using whatever means I can to promote such an outcome. For example, over the past 42 years, I have maintained very good long-term relationships with senior policymakers in both China and the US—as well as some individuals outside the system. So, as in the past, and especially during this highly confrontational period, I have been trying to support a win-win relationship in a way acceptable to and recognized by both sides. I do this partly because I have affection for people on both sides, and partly because a win-win relationship is clearly far better than a lose-lose one. Although it is becoming increasingly difficult now, because some believe “the friend of my enemy is my enemy.”

When the “Big Cycle” reaches this stage—the eve of a major war—fundamental contradictions that cannot be resolved through compromise often drive the cycle forward link by link until it ultimately ends violently. Therefore, understanding this typical Big Cycle structure and continuously observing what is happening in reality becomes very important. I provide this analytical framework to you in the hope that you can use it to compare with the unfolding of real events, see what I see, and then decide how you yourself will respond.

Correspondingly, I believe one point especially needs to be seen clearly: the world order has shifted from one dominated by the US and its allies (e.g., the G7), based on multilateral rules, to one with no single dominant force maintaining order, following more of a “might makes right” principle. This means we are likely to see more conflict. Anyone seriously studying history will realize that today’s world order is closer to the state during most periods of history before 1945, rather than the post-war order we are familiar with; and the implications behind this are also very significant.

4. As History Has Repeatedly Shown, Judging Which Country Is More Likely to Win Does Not Most Reliably Depend on Who Is Stronger, But on Who Can Endure Pain Longer

This is clearly also a key variable in the US-Iran war. The US President assures the American public that this war will end in a few weeks, oil prices will then fall, and life will return to its normal, prosperous state. But a country’s ability to endure pain 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 with weaker public constraints).

In war, victory does not automatically come when the enemy is weakened; victory only appears when the other side surrenders. Because you cannot eliminate all enemies. During the Korean War, when China entered the war with its own strength far weaker than the US, while the US possessed nuclear weapons, it is said Mao Zedong once said: “They cannot kill us all.” The meaning is simple: as long as someone continues to fight, the enemy cannot truly win the war. The lessons of Vietnam, Iraq, and Afghanistan are already very clear. True victory is when the winning side can disengage and ensure the losing side no longer poses a threat. The US still appears to be the world’s most

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