Comparing current events to similar situations in history and corroborating them with wise and well-informed leaders and experts has always helped me make better decisions. I find that most wars are full of great divergences in outcomes and unexpected variables. However, in this war with Iran, one thing is clear and almost universally agreed upon: everything ultimately depends on who controls the Strait of Hormuz. Whether from government leaders, geopolitical experts, or people around the world, I've been told that if Iran retains control over the passage through the Strait of Hormuz, or even just the negotiating leverage, then:
1. The United States will be judged to have lost this war, and Iran will be deemed the winner.
Because Iran using the Strait of Hormuz as a weapon will clearly indicate that the United States is unable to resolve this situation. Allowing Iran to block the most important strait in the world—a passage that must be ensured for access—will cause significant damage to the United States, its regional allies (especially the Gulf allies), the countries most dependent on its oil flow, the world economy, and the global order. If Trump and the U.S. cannot win this war—and the measure of victory is simple: whether they can ensure safe passage through the Strait of Hormuz—they will be seen as creating a disaster they cannot manage. It doesn’t matter what the reasons are for the U.S. failure to gain control over the Strait—whether it is anti-war politics threatening President Trump’s political control ahead of the impending midterm elections, his and American voters' lack of willingness to bear the loss of lives and money required to win this war, the U.S. lacking enough military strength to seize and maintain control, or his inability to forge a coalition with other nations to keep the strait open—Trump and the U.S. will have failed.
My studies of history and my assessment of the current situation lead me to believe: if the U.S. fails in this way, losing control of the Strait of Hormuz will pose significant risks for America—just as the 1956 Suez Crisis did for Britain, and similar failures faced by the Dutch Empire in the 18th century and the Spanish Empire in the 17th century. The historical pattern of empire collapse is almost always the same. Although I elaborate on this more comprehensively in my book "Principles for Dealing with the Changing World Order," I can tell you here: in countless cases, a power perceived as weaker challenges a dominant power for control of critical trade routes (like Egypt challenging Britain’s control of the Suez Canal). In these cases, the dominant power (like Britain) threatens the weaker power (like Egypt) with the opening of the routes, and everyone closely observes, adjusting their attitudes towards these nations and the flow of funds based on the results. This "final showdown" that decides victory or defeat, and the fate of empires, reshapes history because people and capital will quickly and naturally flow away from the losers. These shifts affect markets, especially debt markets, currency markets, and gold markets, as well as geopolitical patterns. After studying so many similar cases, I arrived at the following principle:
When the world’s dominant power—the holder of the world’s reserve currency—overextends itself financially and exposes its weaknesses by simultaneously losing military and financial control, be wary of allies and creditors losing confidence, losing reserve currency status, debt assets being sold off, and currency devaluation, especially relative to gold.
Because people, countries, and capital will quickly and naturally rush to the victors, if the U.S. and President Trump cannot control the passage of ships through the Strait of Hormuz, it will threaten America’s power in the world and the existing world order. Although it has long been assumed that the U.S. is the dominant power capable of defeating rivals militarily and financially (especially against mid-level power rivals), the cumulative effects of the Vietnam, Afghanistan, Iraq wars, and perhaps the war with Iran’s military, financial, and geopolitical consequences are not favorable for the sustainability of the U.S. and the world order led by America since 1945.
Conversely, when the world’s dominant power demonstrates its military and financial strength, it enhances external confidence in it, as well as the willingness to hold its debt and currency. When President Reagan facilitated the release of hostages from Iran immediately after taking office, and ordered the U.S. Navy to escort tankers during the Iran-Iraq War when Iran was attacking Gulf shipping, this demonstrated his and America’s strength against Iran. If President Trump proves that he and the U.S. have the capability to deliver on his promises—namely, to win this war by ensuring free passage through the Strait of Hormuz and eliminating Iran's threats to its neighbors and the world—it would greatly enhance external confidence in him and the strength of the U.S.
2. On the other hand, if Iran continues to control the Strait of Hormuz, using it as a weapon to threaten America’s Gulf allies and the broader world economy, everyone will become hostages to Iran, and Donald Trump will be seen as having provoked a fight that he lost.
This will leave a huge dilemma for America’s allies in the region and will result in a loss of credibility, especially considering his previous statements. For example, Trump said: "If there is any reason for a breach, and it is not cleared immediately, the military consequences for Iran will be unprecedented." "We will swiftly destroy those targets that can be easily hit, making it almost impossible for Iran to rise again as a nation—death, fire, and fury will rain upon them." "The new leaders of Iran must earn our approval; otherwise, they will not last long." I often hear senior decision-makers from other countries privately say, "He talks a good game, but can he win when the situation really gets serious?" Some observers are looking forward to this showdown, like Romans watching from the sidelines of an arena or sports fans awaiting the final battle. President Trump is calling on other countries to join the U.S. in ensuring free passage through the Strait of Hormuz; whether he can successfully gather these countries will reflect his capacity to build alliances and amass power, thus constituting a significant victory.
It will be challenging for the U.S. and Israel alone to ensure the safe passage of ships without seizing control of the Strait from Iran, which may require a major war. For Iran’s leaders and the largest, most powerful demographic groups in Iran, the outcome of this war is a matter of life and death. For Iranians, this war is largely about revenge and holding on to something more important than life itself. They are willing to sacrifice—displaying a willingness to die is crucial for their self-esteem and is a way to express devotion and gain the greatest rewards—while at the same time, Americans are worried about high oil prices, and U.S. leaders are anxious about the midterm elections.
In war, the ability to endure suffering is even more important than the ability to inflict suffering.
Iran’s plan is to try to drag the war out and escalate it gradually, because it is well known that the American public, and thus American leaders, have a very limited capacity to endure pain and prolonged wars. Therefore, if this war is dragged on long enough and painfully enough, Americans will give up the fight, abandoning their Gulf "allies," and other "allies" worldwide in similar positions will also see that the U.S. will not protect them at critical moments. This will undermine relations with allies.
3. While there is discussion about ending this war with an agreement, everyone knows that no agreement can solve this war, as agreements are worthless.
Whatever happens next—whether leaving the Strait of Hormuz in Iranian hands or taking control away from them—could be the most intense phase of this conflict. This "final showdown" will clearly reveal who gains and who loses control, and it will likely be on a massive scale.
Quoting the Iranian military command: "All oil, economic, and energy facilities in the region belonging to oil companies, any part of which is owned by America or associated with America, will be immediately destroyed and turned to ashes." This is what they will attempt to do. If the Trump administration successfully enlists other countries to send warships for safe escort and the shipping lanes have not been mined, we will see if this can become the solution. Both sides understand that the final showdown, which will clearly reveal who wins and who loses, is still ahead. They also understand that if President Trump and the U.S. fail to deliver on the promise to reopen the strait, the consequences will be significantly adverse for them. On the other hand, if President Trump wins this final showdown and at least eliminates the Iranian threat for the next several years, it will deeply shock everyone, give President Trump greater authority, and demonstrate the strength of the U.S.
4. The direct and indirect impacts of this "final showdown" will create ripples globally, affecting trade flows, capital flows, and geopolitical developments with countries and regions such as China, Russia, North Korea, Cuba, Ukraine, Europe, India, and Japan.
This current war, along with other recent conflicts, is part of a larger classic "big cycle" evolution that has far-reaching effects on financial, political, and technological levels. By studying past similar wars and applying the lessons learned to the current situation, we can best understand these impacts. For example:
A nation's ability to conduct war financially and militarily is affected by the number and intensity of wars it is involved in, domestic politics, and relations with countries of common interests (e.g., relationships between Iran, Russia, China, and North Korea).
The U.S. does not have the capability to fight multiple wars simultaneously (no country does), and in this highly interconnected world, wars spread rapidly, much like a pandemic, in ways that are unimaginable. Meanwhile, within each country, especially in democracies with significant wealth and value differences, there are always debates about what should be done and how much each side should bear (in terms of money, loss of lives, etc.). These direct and indirect correlations and consequences are almost certain to occur, though they are extremely difficult to predict, but the outcomes are not optimistic.
As I conclude this essay, I want to emphasize: I hold no political stance; I am simply a practical person who needs to make judgments about what is going to happen and use historical studies to help me make the right judgments. Now, I share my principles and thoughts in hopes of helping others find direction in these turbulent times.
As I explained earlier, by studying the rise and fall of empires and their reserve currencies over the past 500 years—I originally undertook this research to help myself make global macro bets (and I shared it in my book and YouTube video "The Changing World Order")—there are five interconnected forces driving the rise and fall of the monetary order, political order, and geopolitical order:
- Long-term debt cycles (explained in detail in my book "How Countries Succeed or Fail: Big Cycles")
- Associated political cycles of order and disorder (evolving through clearly identifiable stages and triggering civil wars at their worst)
- Associated cycles of international geopolitical order and disorder (also evolving through clearly identifiable stages and leading to devastating world wars at their worst)
- Technological advancements (which can enhance or destroy life)
- Natural forces
Everything happening in the Middle East now is just a small part of this "big cycle" at this particular historical moment.
While it is impossible to foresee and precisely grasp all the details and specifics, measuring the health and evolutionary progress of these five forces and the overall "big cycle" is quite easy. For you, the most important thing is to ask yourself: Is the evolution of this "big cycle" real? Do these indicators illustrate where we are in the "big cycle"? If so, how should I respond? If you would like to ask me questions in the comments section, I am always happy to discuss these issues further with you.
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