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

Original Author: Ray Dalio & Translation: Peggy, BlockBeats

Editor's Note: While the market is still pricing in short-term questions like "How long will the conflict last?" and "Where will oil prices go?", this article attempts to shift the perspective to a longer timescale. Ray Dalio, founder of Bridgewater Associates, believes that the current series of regional conflicts are piecing together an unnamed "world-class conflict," whose evolutionary logic is closer to the cyclical phase before a major historical war.

Through a "grand cycle" perspective, the article breaks down the current situation into a series of simultaneous structural changes: a redivision of camps, escalating trade and capital conflicts, the "weaponization" of key channels, the parallel unfolding of conflicts in multiple theaters of war, and the gradual pressure on domestic political and financial systems.

Within this framework, the US-Iran conflict is no longer merely a Middle East issue, but becomes a window into the restructuring of the global order—how it will affect trust among allies, resource allocation, and strategic decision-making, and subsequently spill over to broader regions such as Asia and Europe. More importantly, the article repeatedly emphasizes a neglected variable: the outcome of a war does not depend on absolute strength, but on the ability of each party to withstand long-term attrition. This judgment shifts the analysis from "who is stronger" to "who can hold out longer," placing the United States in a more complex position—it is both the most powerful nation currently and the most "overextended" in global commitments. In the author's view, the current implicit assumption in the market—a short-term end to the conflict and a return to normalcy—may itself be the biggest misjudgment. Historical experience shows that wars often do not have a clear starting point, but rather evolve gradually from economic, financial, and technological conflicts, manifesting 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 issue: the real risk lies not in whether a particular conflict breaks out, but in whether these conflicts begin to interconnect. As the world slides from a "rule-based order" to a "power order," conflict will no longer be the exception, but may become the new normal. Understanding this shift is the starting point for judging all future variables. The following is the original text: I would like to wish you all the best during this challenging time. I also want to clarify that the picture outlined in the following observations is not one I hope will come true; it is merely a picture that I believe is closer to reality based on the information I have and a series of indicators I use to objectively judge reality. As an investor with over 50 years of experience in global macro investing, in order to cope with the ever-present changes, I have had to study all the factors that have influenced the market over the past 500 years. In my view, most people tend to focus only on and respond to the most eye-catching events of the moment—such as the current situation in Iran—while ignoring the larger, more important, and long-term evolving forces that are truly driving the current situation and determining its future trajectory. The most important point right now is that 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 anytime soon. Of course, what happens next in the Strait of Hormuz—especially whether its control will be taken away from Iran, and how much personnel and financial resources which countries are willing to pay—will have a profound impact on the world. Furthermore, a series of other issues deserve attention: whether Iran still possesses the capability to threaten and harm neighboring countries with missiles and nuclear weapons; how many troops the United States will send and what missions they will undertake; how gasoline prices will change; and the upcoming US midterm elections. All these short-term issues are important, but they can also cause us to overlook the truly larger and more critical things. More specifically, because most people are used to looking at things from a short-term perspective, they now generally expect—and the market is pricing in accordingly—that this war won't last long, and that everything will return to "normal" after it ends. But almost no one discusses the fact that we are in the early stages of a world war that won't end anytime soon. Because I have a different framework for judging the situation, I'd like to explain why below. Here are a few of the big issues that I think really need our attention: Issues Worth Paying Attention To1. We are in the midst of a world war that won't end anytime soon. This may sound exaggerated, but one thing is undeniable: we live in a highly interconnected world where multiple hot wars are happening simultaneously (such as 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-Iran war). Most of these wars involve major nuclear-armed states. In addition, a large number of important "non-hot wars" are also occurring concurrently—trade wars, economic wars, capital wars, technology wars, and struggles for geopolitical influence—and almost every country is involved. These conflicts combined constitute a very typical global war, similar to historical "world wars." For example, past "world wars" were usually composed of multiple interconnected wars, often without a clear start date or explicit declaration of war, gradually sliding into a state of war without anyone realizing it. These past wars ultimately converged into a typical dynamic mechanism of world war, influencing each other; current wars are exhibiting the same structure. I described this dynamic mechanism in detail in Chapter Six, "The Great Cycle of External Order and Disorder," of my book *Principles for Coping with the Changing World Order*, published about five years ago. If you would like a more complete explanation, you can read that chapter; it discusses the evolutionary trajectory we are currently experiencing and what is likely to happen next. 2. Understanding how the various camps align themselves and their relationships is crucial. Objectively judging how the various parties align themselves is not difficult. We can see this clearly through various indicators, such as formal treaties and alliances, UN voting records, statements by national leaders, and their actual actions. For example, you can see China standing with Russia, which in turn stands with Iran, North Korea, and Cuba; this group of forces is largely opposed to the United States, Ukraine (which stands with most European countries), Israel, the Gulf Cooperation Council countries, Japan, and Australia. These alliances are crucial for assessing the future situation of the parties involved, and therefore must be taken into account when observing the current situation and projecting the future. For instance, we can already see this alignment in the actions of China and Russia at the United Nations regarding whether Iran should open the Strait of Hormuz. Furthermore, many people say that China would be particularly harmed if the Strait of Hormuz were closed, but this is incorrect. The mutual support between China and Iran would likely allow oil shipments to China to continue flowing; simultaneously, China's relationship with Russia would ensure that China can obtain oil from Russia. In addition, China has abundant other energy sources (coal and solar energy) and a large oil reserve, enough for approximately 90 to 120 days of use. Another point worth noting is that China consumes 80% to 90% of Iran's oil production, further strengthening the power base in Sino-Iranian relations. Overall, in this conflict, China and Russia appear to be the relative economic and geopolitical winners. As for the oil and energy economy, the United States is in a relatively advantageous position because it is itself an energy exporter, a significant advantage. There are many ways to measure these alliances, 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 reviewing these representative major treaties, please refer to Appendix 1. Similarly, if you want to understand the major wars that are currently existing or may occur, and how my indicator system judges their probability of occurrence or escalation in the next five years, please refer to Appendix 2.) 3. Study similar historical cases and compare them with the current situation. This method is rarely used, but it has been extremely valuable to me in the past and present, and it may be the same for you. For example, whether looking back at several similar historical cases or deducing logically, it is not difficult to see that how the United States, the dominant force in the post-1945 world order, performs in a war with Iran, a middle power, how much money and military equipment it spends and depletes, 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 United States—Israel—and now the Gulf Cooperation Council countries—and Iran will have a profound impact on what other countries, especially in Asia and Europe, will do next, which in turn will profoundly influence how the world order evolves. These changes will unfold in ways that have repeatedly occurred throughout history. For example, by studying history, we can easily identify overextended empires, establish indicators to measure the extent of their overexpansion, and see how they have suffered as a result. In the present context, it is natural to look at what is happening in the United States: the U.S. now has 750 to 800 military bases in 70 to 80 countries (incidentally, China has only one), and bears a global, costly, and highly vulnerable security commitment. At the same time, history clearly tells us that overextended great powers cannot successfully fight two or more wars simultaneously, which inevitably raises doubts about the United States' ability to fight on another front—such as in Asia and/or Europe. Therefore, I naturally consider 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, I wouldn't be surprised if certain problems arise in Asia in the future to test and expose whether the United States is willing to meet the challenge. The United States will then find it difficult to respond effectively because it has already committed a large amount of deterrent commitments in the Middle East, and with the midterm elections approaching, public support for the war with Iran is already lacking, making it highly unrealistic for it to fight another war on another front. This dynamic may lead to the following result: other countries, observing the evolution of US-Iran relations, will readjust their judgments and behaviors, thereby promoting 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 from the experiences of Middle Eastern countries similarly dependent on US protection in this conflict and adjust their strategies accordingly. Similarly, countries located near key straits, strategically important locations, or with US military bases in potential conflict zones (such as Asia, where a US-China conflict could erupt), will closely monitor the developments of the Iran war and draw their own conclusions. I can confidently say that this kind of thinking is indeed happening among national leaders, and similar situations have occurred repeatedly in similar phases of the "greater cycle." These judgments and adjustments by national leaders are part of a classic evolutionary path leading to large-scale war—a process that has played out repeatedly and is happening now. Considering the current situation and comparing it to this classic cycle of international order and conflict, I believe we have progressed to step nine. Do you share similar sentiments? Below are the general steps of this classic evolutionary path: The economic and military strength of the dominant world power begins to decline relative to the rising power, the two sides gradually become closer in strength, and confrontation ensues on the economic and military levels over their differences. Economic warfare escalates significantly, manifested in sanctions and trade blockades. Economic, military, and ideological alliances gradually form. Proxy wars increase. Fiscal pressure, deficits, and debt rise, especially in dominant countries where fiscal expansion has been excessive. Key industries and supply chains are gradually brought under government control. Key trade routes have been weaponized. New warfare technologies are developing rapidly. Conflicts in multiple theaters are beginning to occur simultaneously. Internally, countries demand high loyalty to their leadership, and dissent against war or other policies is suppressed—as Lincoln quoted from the Bible, "A divided nation cannot last long," especially during wartime. Direct military conflict erupts between major powers. To support the war, taxes, debt issuance, currency issuance, foreign exchange controls, capital controls, and financial repression increase significantly, sometimes even leading to market closures. (For investment logic during wartime, please refer to Chapter 7 of *Principles for Responding to a Changing World Order*.) Ultimately, one side defeats the other, establishing a new order, designed primarily by the victor. Among the indicators I've tracked, many show that we are in a phase of a "great cycle": the monetary system, parts of the domestic political order, and the geopolitical order are all disintegrating. These signals indicate that we are in a transitional period from the "pre-conflict phase" to the "conflict phase," roughly similar to the historical points between 1913–1914 and 1938–1939. Of course, these indicators are not precise predictions, and the scenarios and timelines they depict are not definitive. These indicators are more of a directional indicator. History tells us that wars often have no clear starting point (unless a major military event like the assassination of Archduke Franz Ferdinand, the German invasion of Poland, or the attack on Pearl Harbor triggers a formal declaration of war), and economic, financial, and military conflicts usually begin before the formal outbreak of war. Major wars are often foreshadowed by a series of signals, such as: 1) the depletion of military and resource reserves; 2) rising fiscal spending, debt, money supply, and capital controls; 3) adversary nations learning from each other's strengths and weaknesses by observing the conflict; and 4) an overextended dominant power being forced to deal with dispersed and geographically distant multi-front conflicts. These factors are all crucial, and the indicators I have observed are sufficient to warrant vigilance. In this cyclical phase, the typical evolutionary path of conflict is not easing, but escalation. Therefore, what happens next largely depends on the trajectory of the US-Iran conflict. For example, some countries have become more skeptical about whether the US will fulfill its defense commitments; meanwhile, the recognition that nuclear weapons possess both defensive and offensive capabilities is prompting policymakers worldwide to discuss acquiring nuclear weapons, expanding nuclear stockpiles, and strengthening missile and anti-missile systems. To reiterate, I am not saying that the situation will necessarily continue to deteriorate along this cycle and ultimately escalate into a full-blown world war. I do not know exactly what will happen next, and I still hope that the world will ultimately be built on win-win relationships, rather than destroyed by lose-lose ones. I have been doing everything within my power to promote this 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 with some people outside the system. So, this has been true in the past, and especially in this highly confrontational period, I have been trying to support a win-win relationship in a way that is acceptable and recognized by both sides. I do this partly because I have feelings for people on both sides, and partly because a win-win relationship is clearly far better than a lose-lose one. Although this is becoming increasingly difficult because some believe "my enemy's friend is my enemy," at this stage of the "great cycle," that is, on the eve of a major war, fundamental contradictions that cannot be resolved through compromise often propel the cycle forward, one link after another, until it ultimately ends in violence. Therefore, understanding this typical great cycle structure and continuously observing what is happening in reality becomes crucial. I am providing this analytical framework to you so that you can use it to compare with the unfolding of real-world events, see clearly what I am seeing, and then decide how you should respond. Correspondingly, I believe one point is particularly important to understand: the world order has shifted from one dominated by the United States and its allies (such as the G7) and based on multilateral rules to one where there is no single dominant power maintaining order, and where "might makes right" prevails more. This means we are likely to see more conflicts. Anyone who seriously studies history will realize that the current world order is closer to the state of affairs in most of history before 1945 than to the post-war order we are familiar with; and the implications behind this are profound. 4. As history has repeatedly shown, the most reliable way to determine which country is more likely to win is not by who is stronger, but by who can endure suffering longer. This was clearly one of the key variables in the Iraq War. The US president assured the American public that the war would end within weeks, oil prices would fall, and life would return to normal and prosperous. But there are many observable indicators of whether a country can endure suffering in the long term, such as public approval ratings (especially in democracies) and the ability of government leaders to maintain control (especially in authoritarian regimes with weaker public support). In war, victory does not come automatically when the enemy is weakened; victory only comes when the enemy surrenders. Because you can't eliminate all enemies. During the Korean War, China entered the war with far less power than the United States, and the US possessing nuclear weapons. It's said that Mao Zedong once said, "They can't kill us all." The meaning is simple: as long as there are people fighting, the enemy cannot truly win the war. The lessons of Vietnam, Iraq, and Afghanistan are very clear. True victory is when the victorious side can extricate itself and ensure that the defeated side no longer poses a threat. The United States still appears to be the most powerful country in the world, but it is also the most overextended great power and the most vulnerable among major powers in terms of enduring long-term suffering. 5. All of this is unfolding in a typical "grand cycle." The so-called "typical grand cycle" refers to events primarily driven by five major forces: the cyclical fluctuations of currency, debt, and the economy between monetary order and disorder; the collapse of political and social order caused by wealth inequality and value divisions; the collapse of regional and global order caused by wealth inequality and value divisions; major technological advancements used simultaneously for both peace and war, and the accompanying financial bubbles, which typically burst; and natural events such as droughts, floods, and pandemics. I don't want to go into a more detailed explanation here about how the "grand cycle" works, how these five forces drive change, and the 18 underlying determinants behind them. However, I still recommend that you understand this framework and that you read my book or watch the YouTube video of the same name: "Principles for Dealing with a Changing World Order." 6. Having a good system of indicators and continuously tracking them is extremely valuable. Many of the indicators I use to track these evolving situations are already explained in *Principles for Responding to a Changing World Order*. I especially recommend Chapter Six, "External Order and the Great Cycle of Disorder." If you also want to understand the investment-level changes that are almost unimaginable in peacetime but frequently occur during wartime, then I also recommend Chapter Seven, "Understanding Investment in War from a Great Cycle Perspective." I recently shared these two chapters online, where you can read them. This concludes my overall assessment of the situation so far. Because this assessment not only influences my investment decisions but also how I conduct myself in other aspects of life, I will discuss these issues further later. As mentioned earlier, two appendices are included at the end: one contains information on relevant alliances between countries, and the other is a brief overview of current or potential major conflicts. Appendix 1: Relevant Treaties Below is a list of what I consider to be some of the most important treaties, along with a 1-5 rating of the strength of their implied commitments, and a brief description of each treaty. Overall, other indicators of alliance—such as leaders' statements and actions—are largely consistent with the relationships reflected in these treaties. However, it is becoming increasingly clear that all these treaties, especially those related to the United States, are subject to change, and that actual actions will ultimately carry more weight than the text of the agreements themselves.

1. Key US Treaties:

2. Key Treaties between China, Russia, Iran, and North Korea:

Appendix 2: Existing and Potential Wars

The following lists what I consider to be the most important existing or potential wars, including my brief assessment of the situation and my probability assessment of the outbreak or escalation into military conflict within the next five years.

The Iran-US-Israel War is already a full-blown war and appears to be escalating, with all sides continuously expending resources. Key variables to watch include: a) Who will ultimately control the Strait of Hormuz, Iranian nuclear materials, and Iranian missiles; b) How much human and financial resources each country is willing to pay to win the war; c) The satisfaction of each participating country with its alliances; d) Whether Iran's allies (such as North Korea) will directly intervene or support Iran through arms sales, or whether conflict will erupt in Asia, forcing the US to choose between fulfilling its commitments and choosing inaction; and e) Whether peace and security can be restored in the Gulf region. This is an active war involving almost all major military powers (except China), and the risks are extremely high. However, the conflict has not yet expanded beyond Ukraine in the past three years, which is a relatively positive sign, meaning that a larger-scale war has been temporarily avoided. Currently, Russia is directly fighting Ukraine, NATO is providing weapons support to Ukraine at a huge financial cost, and European military spending and war preparations against Russia are rising. NATO's lack of direct involvement and the fear of nuclear war among all parties have temporarily curbed the escalation of the conflict. Risk signals that need to be monitored include: Russian attacks on NATO territory or supply lines, direct NATO military intervention, and accidental conflicts between Russia and NATO member states. I believe the probability of these scenarios occurring and leading to the expansion of the war is low, roughly 30%–40% in the next five years. North Korea-Related Wars: North Korea is a highly provocative nuclear state and has demonstrated a willingness to fight for its allies in a confrontation with the United States. It possesses missiles capable of carrying nuclear warheads and striking the U.S. mainland (although current reliability remains limited), but this capability will significantly improve over the next five years. North Korea has close ties with China and Russia, which could serve as effective proxy forces. Meanwhile, North Korea is extremely aggressive in demonstrating and developing its missile capabilities but is not inclined to sell such weapons to other countries. I believe there is a 40%–50% probability of some form of military conflict occurring within the next five years. South China Sea—Philippines—China—U.S. Conflict: The U.S. and the Philippines have a NATO-like defense treaty, and the Chinese coast guard has repeatedly clashed with Philippine forces; these frictions could further involve U.S. naval patrols. The threshold for triggering conflict is actually quite low—for example, a ship collision, a Chinese attack on a Philippine vessel, a blockade, or a missile incident—and once this occurs, the United States will face pressure regarding its treaty obligations. However, American voters may not support such military intervention, which would place the US leadership in an extremely difficult and highly symbolic choice. I believe there is about a 30% probability of this conflict occurring within the next five years. Overall, of these potential conflicts, the probability, in my view, of at least one occurring within the next five years is over 50%.