“Be aware of the loss of trust from allies and creditors, the weakening of reserve currency status, the sale of debt securities, and the devaluation of the currency, especially against gold.”
Ray Dalio didn’t write that sentence about the United Kingdom in 1956. He wrote it about the United States in March 2026. But the parallel was evident—and intentional. Founder of Bridgewater Associates and contributor to FortuneDalio spent decades studying the rise and fall of reserve currency-issuing empires over 500 years of history. To explain what, in his view, is happening in real time with the greatest power on the planet, he used a specific afternoon in November 1956.
That day, then British Prime Minister Anthony Eden received a phone call that symbolically marked the end of an empire.
The Suez precedent
At the end of October 1956, the United Kingdom and France — alongside Israel — invaded Egypt after President Gamal Abdel Nasser nationalized the Suez Canal, a vital route for trade between Europe and Asia. Militarily, the operation was successful. Within days, Anglo-French forces controlled the northern part of the canal. But the victory was short-lived outside the battlefield.
The United States, alarmed by the unilateral action and unwilling to allow its allies to upset the Cold War balance, reacted with force. Washington threatened to block emergency loans from the IMF just as the pound was under severe pressure in the markets. It was a kind of financial war — and it worked. Faced with the currency crisis, Eden backed down and withdrew troops from Egypt in a matter of weeks.
The Army won, but the empire lost. And what came after followed, according to Dalio and the Bridgewater studies, the classic script of imperial decline: allies stopped automatically aligning themselves with London, creditors began to look at British debt more cautiously, and the British pound — which for more than a century had been the world’s main reserve currency — entered a trajectory of loss of relevance. In the four years following the Suez Crisis, the United Kingdom granted independence to Ghana, Malaysia, Nigeria and Cyprus. In less than a decade, Harold Macmillan’s famous “winds of change” speech only made official what Suez had already revealed: the British Empire was in retreat, not expansion.
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Today, the United Kingdom remains a rich and relevant economy, with almost 70 million inhabitants and the fifth largest GDP in the world, behind the USA, China, Germany and Japan. It is an important member of NATO, the G7, the UN Security Council and is home to London, one of the main global financial centers. Still, its so-called “special relationship” with the United States was never the same after Suez.
Dalio sees a new Suez in Hormuz
In March, Dalio directly compared the impasse in the Strait of Hormuz to the Suez Crisis. For him, this is a recurring pattern in history: a rising power challenges the dominant power around a strategic trade route, while the rest of the world watches where money, influence and alliances migrate.
In his reading, there was a decisive asymmetry of motivation. For the Iranian leadership, the war had an existential character. For the American voter, the central concern was the price of gasoline; for US politicians, the focus was on legislative elections. “In war,” wrote Dalio, “the ability to endure pain is even more important than the ability to inflict pain.”
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In April, he expanded the argument further. On his Substack page, he wrote that “we are in the early stages of a world war that will not end anytime soon.” The idea was that the conflict with Iran would not be an isolated episode, but part of a deeper reorganization of global power — a dispute in which finance and military power go hand in hand.
The United States and Israel began a bombing campaign against Iran at the end of February, followed by a ceasefire and months of difficult and inconclusive negotiations. American forces struck nuclear installations, missile bases and other military targets in several regions of the country. The Iranian regime was weakened, and the economy suffered, but Iran resisted. There was no regime change, and the nuclear program was not demonstrably dismantled.
In late June, American negotiators were still in Qatar trying to reach a memorandum of understanding to reopen the Strait of Hormuz in exchange for gradual economic relief. The outcome was far from the quick and decisive victory imagined at the beginning of the operation.
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Dalio was just the best-known voice to make the comparison between Hormuz and Suez — an analogy that almost became a meme during the war. Other analysts, such as Fawaz Gerges of the London School of Economics, Ishaan Tharoor and James Dorsey, have also explored this parallel. The most consistent criticism came from the Arabic newspaper Asharq Al-Awsatwhich published an article in April saying the comparison was “tempting but misleading.”
Basically, the discussion revolves around two questions: was the United Kingdom already in decline before Suez? And was the US already in decline before Hormuz? There is still one important difference: in 1956, the British were forced to retreat under pressure from a creditor. Today, only China would have the weight to play a similar role vis-à-vis the USA.
The petrodollar and debt at the center of the discussion
Two factors appear at the center of this decline thesis: the petrodollar system and the weight of the American public debt. To understand the first, it is necessary to go back to 1974, when a secret agreement was reached that would only become public decades later.
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Richard Nixon sent Henry Kissinger to Saudi Arabia to arrange a strategic arrangement. Riyadh agreed to sell its oil exclusively in dollars and reinvest oil revenue in US Treasury bonds. In return, it received military support, equipment and security guarantees from the US. Other OPEC countries followed the same line, consolidating the dollar as the centerpiece of the global financial system and giving rise to the so-called petrodollar.
The then French Finance Minister, Valéry Giscard d’Estaing, defined this as an “exorbitant privilege”. Economist Yanis Varoufakis called the system a “global minotaur”, in an analogy to the tributes demanded by the king of Crete in Greek mythology.
It is in the Strait of Hormuz that this privilege has always been most exposed in the real world.
At the same time, a few weeks after the start of the war, US debt exceeded US$39 trillion, on March 18, 2026. The country had already suffered rating downgrades by the three main risk rating agencies: S&P, in 2011; Fitch, in 2023; and Moody’s, in May 2025. The dollar’s share of global foreign exchange reserves fell to 56.9%, the lowest level since 1995 and well below the 72% peak seen in 2001.
This does not mean that the dollar’s dominance is collapsing. As they say on Wall Street, it remains “the least dirty shirt in the closet” among problematic currencies. But the pound didn’t collapse all at once after Suez either. It lost ground over three decades, until George Soros bet against the currency and helped seal a process that had been underway for a long time.
Decline is not collapse
The comparison with Suez has its limits — something recognized even by those who defend it. Dalio himself treats this scenario as a possibility, not a certainty. The US remains the world’s largest economy, has the greatest military power in absolute terms and maintains unparalleled cultural influence. Historically, in times of crisis, the movement tends to be a search for dollars, not a flight from the American currency.
The pound has been the anchor of global trade since the Napoleonic era. It took two world wars, the Great Depression and the humiliation of Suez to dismantle this system. The dollar era is about 80 years old and begins at Bretton Woods in 1944, when the US anchored the post-war monetary order on the promise to convert every dollar into gold at US$35 per ounce.
This arrangement changed in 1971, when the costs of the Vietnam War and social programs put too much pressure on American public accounts. Nixon then unilaterally closed the so-called “gold window,” ending dollar convertibility. In place of the physical metal anchor, something more abstract — and also more fragile — came into use: the credibility of American power, later reinforced by the petrodollar agreement.
What makes the war with Iran something bigger than just another crisis in the Middle East, according to this reading, is the combination of factors: debt of US$39 trillion, the dollar’s share of global reserves at the lowest level in three decades, a physical threat to a central point of the petrodollar and a domestic political environment in the US that is increasingly less capable of sustaining long-term conflicts.
That’s why Dalio’s warning resonates. “Both sides know that the final battle, which will make it clear who won and who lost, is yet to come,” he wrote.
For this report, journalists from Fortune used generative AI as a research tool. An editor checked the information before publication.
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