“It all comes down to who controls the Strait of Hormuz,” Dalio wrote in a lengthy post on X. If Iran retains the ability to control or even negotiate over who passes through the strait—through which roughly a fifth of the world’s oil supply flows daily—Dalio argues the U.S. will be seen as having lost the war, regardless of how the conflict is resolved.

Dalio compared a potential U.S. failure at Hormuz to Britain’s humiliation during the 1956 Suez Crisis, a moment widely regarded by historians as the end of the British Empire’s global imperialism. He pointed to a pattern he says has repeated across 500 years of history: a rising power challenges the dominant empire over a critical trade route while the world watches, and money and alliances shift fast toward whoever wins.

When that dominant power, the holder of the world’s reserve currency, is “overextended financially,” as Dalio has often argued (including recently in Fortune) and then “reveals its weakness” by losing control over the conflict. “Watch out for allies and creditors losing confidence, the loss of its reserve currency status, the selling of its debt assets, and the weakening of its currency, especially relative to gold,” he wrote. 

The post arrives at a moment of confusion around who has control over the Strait of Hormuz. The strait has been effectively closed for its third week, though there are signs that a small trickle of vessels are getting through. President Trump disparaged American allies throughout the weekend, and then again on Monday afternoon, for failing to provide military support to help secure the waterway. He then reversed course and said that the U.S. didn’t “need anybody” and was the strongest country in the world. Iranian Foreign Minister Abbas Araghchi said on Sunday that the Strait of Hormuz “is open and only closed to enemies.” Unresolved questions remain on whether Iran mined the strait, which would be an irreversible escalation if true. 

Dalio framed both sides as locked into a conflict with no diplomatic exit. “While there is talk of ending this war with an agreement, everyone knows that no agreement will resolve this war because agreements are worthless,” he wrote, adding that whatever comes next—whether the U.S. takes control of the strait or leaves it to Iran—“is likely to be the worst phase of the conflict.”

The core problem, Dalio said, is motivational asymmetry. For Iran’s leadership, the war is “existential,” a matter of regime survival, national pride, and religious commitment. For Americans, it’s about gas prices, and for U.S. politicians, it’s about the midterm elections. Dalio was clear over which side that calculus favors in a prolonged fight: “In war, one’s ability to withstand pain is even more important than one’s ability to inflict pain.”

Iran’s strategy, he says, is to inflict that pain for as long as possible, then wait for the U.S. to quit, just as it has done in Vietnam, Afghanistan, and Iraq.  

Trump is now calling on allied nations to join a multinational escort operation through the strait, though for the most part, they haven’t yet been receptive. Dalio says it remains to be seen whether that effort can serve as a potential “solution” to getting the waterway reopened.

“If President Trump demonstrates his and the U.S.’s power to do what he said he would do, which is win this war by having free passage through the Strait of Hormuz and eliminating Iran as a threat to its neighbors and the world, it will greatly bolster confidence in his and the U.S.’s power.”

But if he doesn’t, the ripple effects, on everything from trade flows to capital markets and the dollar’s reserve currency status, could irreparably damage American hegemony. Tehran has also threatened the dominance of the petrodollar by reportedly agreeing to open the Strait of Hormuz to a limited number of oil tankers that trade in yuan rather than dollars.  

“Both sides know that the final battle, which will make clear which side won and which side lost, still lies ahead,” Dalio wrote.