Billionaire investor Ray Dalio says the US could lose its financial might on the global stage if President Trump fails to control one critical shipping route in the Middle East.
In a new post on X, Dalio says the United States could follow in the footsteps of Great Britain after failing to control the Suez Canal in 1956.
According to Dalio, the trade route in question today is the Strait of Hormuz, and he says the world is watching whether the US wins the “final battle.”
“I can tell you here that there are innumerable cases in which a perceived lesser power challenges the leading world power over the control of a critical trade route (e.g., Great Britain’s control of the Suez Canal being challenged by Egypt). In these cases, the dominant power (e.g., Great Britain) threatens the lesser power (e.g., Egypt) to open the route, and everyone watches and shifts their approaches to these countries and where their money goes based on what happens. This decisive ‘final battle’ that determines the winners and the losers and whether the empire survives or falls reshapes history because people and financial flows quickly and naturally run from the losers.”
The billionaire warns that if the US is forced to withdraw or agree to a ceasefire without gaining the upper hand, investors around the world could flee from the dollar and dump dollar-based assets, including Treasuries.
“These shifts affect markets, especially the debt, currency, and gold markets, and geopolitical power. Seeing so many analogous cases led me to the following principle: * When the world’s dominant power that has the world’s reserve currency is overextended financially, and it reveals its weakness by losing both military and financial control, 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. Because people, countries, and financial flows quickly and naturally flock to the winner, if the US and President Trump don’t get control of the flow of traffic through Hormuz, it will threaten American power in the world and the existing world order.”
While Dalio is warning about the potential for the loss of confidence in the dollar, the US dollar index (DXY), which tracks the value of the USD against a basket of major currencies, is up over 2% since tensions in the Middle East erupted.
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