Bridgewater Associates founder Ray Dalio says the war with Iran was “a big mistake” that exposed the limits of American power, comparing the moment to Britain’s humiliation at Suez.
Speaking on The Diary of a CEO podcast released Thursday, Dalio said the U.S. and other powers are “later in that cycle” of his 80-year framework of rising and declining orders.
Asked whether America has entered the collapse phase, he settled on “the decline.”
The Litmus Test
World leaders, particularly in Asia, have drawn a conclusion from the conflict, Dalio said. “There’s a recognition that the United States doesn’t want to fight a war,” he said, calling control of the Strait of Hormuz “the litmus test.”
Americans worried about gas prices and casualties want the conflict “all over fast,” he said. “You can’t fight a war that way.”
Dalio questioned whether Washington would pay the long-term cost of controlling the strait and confronting a country of roughly 90 million people.
Taking control of the strait temporarily would not be enough, he argued; the U.S. would have to enforce it "for the forever and ever future."
“It was a big mistake,” he said of the war, which he argued “shone a light on the vulnerability” of the United States.
“Like the British in the Suez Canal, we didn’t realize. Now we realize that threats no longer work, that that power no longer exists.”
Markets Price A Prolonged Crisis
Polymarket assigns a 25% chance the US invades Iran before 2027, a market that has drawn $50.9 million in volume.
Traders see just 7% odds that Hormuz traffic returns to normal by August 31, with the conflict continuing to sharply restrict shipping through a route that previously carried roughly one-fifth of global oil and natural gas supplies.
Brent crude traded near $88 Friday while the average US gasoline price remained above $4.10 per gallon.
The Next Test Is Taiwan
Dalio also questioned whether Washington would intervene if Beijing blockaded Taiwan. "What will the United States literally do?" he asked, arguing that the Iran conflict has led Asian governments to doubt whether America would "show up" in a regional crisis.
China already possesses significant leverage without firing a shot, he said, noting that Beijing has become a larger trading partner than the US for most countries.
Taiwan presents the clearest risk to global markets.
If China blocked semiconductor exports for just five days, "you’d see the world stock markets crash," Dalio said.
A Chinese blockade or military conflict that halted exports from Taiwan could cut global customers off from Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), which produces the advanced chips used by Nvidia Corp. (NASDAQ:NVDA) and much of the broader technology industry.
Even a brief interruption could constrain AI data-center expansion, disrupt electronics and automotive production.
Dalio called the rules-based international order "a nice theory" that holds only when backed by strength. When rules conflict with power, he argued, "which wins? Power."
Image: Shutterstock
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