Everything depends on who controls the Strait of Hormuz: the "Final Battle"

Comparing current events with similar historical situations and consulting with wise, well-informed leaders and experts has consistently helped me make better decisions. I've found that most wars are fraught with vast disagreements and unexpected variables regarding the outcome. However, in this war with Iran, one thing is clear, and almost everyone agrees: it all comes down to who controls the Strait of Hormuz. Government leaders, geopolitical experts, and people around the world have all told me: if Iran retains control of the Strait of Hormuz, or even just as much as it holds negotiating leverage, then:

1. The United States will be judged as the loser of this war, and Iran will be judged as the winner.

Because Iran uses the Strait of Hormuz as a weapon, it will clearly demonstrate that the United States is incapable of resolving this situation. Allowing Iran to block the world's most important strait—a waterway whose passage must be secured by all means—will cause immense damage to the United States, its regional allies (especially those in the Gulf), the countries most dependent on its oil flows, the global economy, and the world order. If Trump and the United States fail to win this war—and the measure of victory is simply ensuring the safe passage of the Strait of Hormuz—they will also be seen as having created a disaster they cannot clean up. Whatever the reasons for the United States' failure to gain control of the Strait of Hormuz—whether it is due to anti-war politics threatening President Trump's political control ahead of the upcoming midterm elections, his own and American voters' lack of willingness to bear the loss of life and money required to win this war, the United States' insufficient military strength to seize and maintain control, or his inability to unite other countries into an alliance to keep the strait open—it is irrelevant. President Trump and the United States have lost.

My study of history and my assessment of the current situation lead me to believe that if the United States fails in this manner, losing control of the Strait of Hormuz would pose a significant risk to the US—just as the 1956 Suez Canal Crisis did for Britain, and similar failures suffered by the 18th-century Dutch Empire and the 17th-century Spanish Empire. The historical patterns of imperial collapse are almost always the same. While I discuss this more comprehensively in my book, *Principles for Coping with a Changing World Order*, I can tell you here that in countless cases, a perceived weaker power challenges the dominant power in the world for control of key trade routes (e.g., Egypt challenging British control of the Suez Canal). In these cases, the dominant power (like Britain) threatens the weaker power (like Egypt) to open the route, and everyone closely observes and adjusts their attitudes towards these countries and the flow of capital accordingly. This decisive "final battle," determining victory or defeat and the survival of the empire, reshapes history because people and capital flow rapidly and naturally from the loser. These shifts affect markets, especially debt, currency, and gold markets, as well as the geopolitical landscape. Having studied so many similar cases, I have derived the following principles:

Because people, nations, and capital gravitate rapidly and naturally to the victors, the inability of the United States and President Trump to control ship traffic in the Strait of Hormuz threatens American power and the existing world order. While the United States has long been perceived as the dominant power capable of militarily and financially defeating its rivals (especially middle powers), the cumulative effects of the military, financial, and geopolitical consequences of the wars in Vietnam, Afghanistan, Iraq, and perhaps now with Iran, are not conducive to the sustainability of the United States and the US-led world order since 1945.

Conversely, when a dominant world power demonstrates its military and financial strength, it bolsters confidence in that power and the willingness to hold its debt and currency. President Reagan's immediate efforts after his election to secure the release of Iranian hostages and his order for the U.S. Navy to escort oil tankers during Iran's attacks on Gulf shipping during the Iran-Iraq War demonstrated his and America's strength against Iran. If President Trump proves he and the U.S. are capable of delivering on his promises—to win this war by ensuring free passage through the Strait of Hormuz and eliminating Iran's threat to its neighbors and the world—it will significantly boost confidence in his and America's power.

2. On the other hand, if the Strait of Hormuz remains under Iranian control and is used as a weapon to threaten U.S. Gulf allies and the wider world economy, everyone will become a hostage of Iran, and Donald Trump will be seen as having started a fight that he has lost.

He will leave America's allies in the region with a huge problem and will lose credibility, especially given his previous statements. For example, Trump said, "If mines are laid for any reason and are not immediately cleared, the military consequences against Iran will be unprecedented." "We will easily destroy those targets that can be easily destroyed, making it virtually impossible for Iran to rise again as a nation—death, fire, and fury will engulf them." "Iran's new leader must be approved by us; otherwise, he will not last long." I often hear senior policymakers from other countries say privately, "He talks a good game, but when things get really tough, can he win?" Some observers anticipate this contest like the Romans waiting at the arena, or sports fans awaiting the final battle. President Trump is calling on other countries to join the United States in ensuring free passage through the Strait of Hormuz; his success in securing their participation will be a testament to his ability to build alliances and assemble power, and therefore a major victory.

It would be difficult for the United States and Israel alone to ensure the safe passage of ships without reclaiming Hormuz from Iranian control; a major war might be necessary. For Iranian leaders and the largest and most powerful population in Iran, the outcome of this war is a matter of life and death. For Iranians, this war is largely about revenge and upholding something more important than life itself. They are willing to sacrifice—demonstrating a willingness to die is crucial to their self-respect and a way to express piety and reap the greatest rewards—while Americans worry about high oil prices and their leaders are preoccupied with the midterm elections.

Iran's plan is to delay and escalate the war gradually, because it is well known that the American public, and consequently American leaders, have extremely limited tolerance for a painful and protracted conflict. Therefore, if the war drags on painfully and for a long enough, the Americans will abandon the fight, forsaking their Gulf "allies," and other "allies" in similar situations around the world will see that the United States will not protect them in critical moments. This will shake relations with allies.

3. Although there were discussions about ending the war with an agreement, everyone knew that no agreement could resolve the war because it would be worthless.

Whatever happens next—whether Hormuz remains in Iranian hands or control is snatched from them—is likely to be the most intense phase of this conflict. This "final battle," which will clearly reveal who wins and who loses control, is likely to be extremely large in scale.

To quote the Iranian military command: "All oil, economic, and energy facilities in the region belonging to oil companies, and those partially owned by or cooperating with the United States, will be immediately destroyed and reduced to ashes." This is what they are trying to do. If the Trump administration succeeds in securing security escorts from other countries and the waterways have not been mined, we will wait and see if this can be a solution. Both sides know that the final battle, which will clearly reveal who will win, is still ahead. They also understand that if President Trump and the United States fail to deliver on their promise to reopen the Straits, the consequences will be extremely detrimental to them. On the other hand, if President Trump wins this final battle and eliminates the Iranian threat for at least the next few years, it will be a resounding success, giving him greater authority and demonstrating American power.

4. The direct and indirect impacts of this "final battle" will have ripple effects 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.

The current war, along with other recent wars, is part of a larger, classic "grand cycle" of evolution, with profound financial, political, and technological implications. These impacts can be best understood by studying similar past wars and applying the lessons learned to the current situation. For example:

The United States lacks the capacity to wage multiple wars simultaneously (as no other country can), and in this highly interconnected world, war, like a pandemic, spreads rapidly in unimaginable ways. Meanwhile, within nations, especially within democracies with vast differences in wealth and values, there is always debate about what should be done and who should bear the costs (i.e., financial loss, loss of life, etc.). These direct and indirect connections and consequences are almost inevitable, though extremely difficult to predict, and the outcome is unlikely to be optimistic.

In closing, I want to emphasize that I have no political stance; I am simply a practical person who needs to make judgments about what is to come and learns from history to help me make the right decisions. Now, I share my principles and thoughts in the hope 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—a study I initially undertook to help myself make global macro bets (and share it in my book and YouTube video, *The Changing World Order*)—five interconnected forces drive the rise and fall of monetary, political, and geopolitical orders:

1. Long-term debt cycles (fully explained in my book, *How Nations Go Bankrupt: The Great Cycle*).
2. The associated political cycles of order and disorder (evolving in clearly identifiable phases, culminating in civil war at their worst)
3. The related cycles of international geopolitical order and disorder (also evolving in clearly identifiable stages, culminating in a devastating world war in the worst-case scenario)
4. Technological advancements (which can either improve or destroy life)
5. Natural forces

What is happening in the Middle East right now is just a small part of this "great cycle" at this particular historical moment.

While it's impossible to foresee and precisely grasp every detail and specific situation, it's relatively easy to assess the health and evolution of these five forces and the overall "Great Cycle." For you, the most important thing is to ask yourself: Is this "Great Cycle" truly evolving? Do these indicators indicate where we are within the "Great Cycle"? If so, how should I respond? If you'd like to ask me questions in the comments section, I'm always happy to discuss these issues in depth.