"We need to be wary of declining confidence among allies and creditors, weakening reserve currency status, sell-off of debt assets, and continued depreciation of the dollar relative to gold."

The above assessment is not directed at Britain in 1956, but rather at Ray Dalio's summary of the current state of the United States in March 2026. He deliberately compared the current situation in the United States with the crisis in Britain at that time. As the founder of Bridgewater Associates and a columnist for Fortune magazine, Dalio has spent decades studying the rise and fall of major reserve currency powers over the past five centuries. He uses the key events of November 1956 as a reference to interpret the structural recession crisis currently facing the United States.



It was on that afternoon in 1956 that a single telephone call brought an end to the British Empire's hegemonic status.

The classic "Suez Moment": military victory, collapse of hegemony.

In late October 1956, Egyptian President Nasser nationalized the Suez Canal, a vital trade route between Europe and Asia. Britain and France, along with Israel, then launched a military intervention in Egypt. The military operation was initially successful, with the Anglo-French forces controlling the northern section of the canal within days. However, this battlefield victory failed to translate into a strategic victory, and the situation quickly reversed.

Dissatisfied with its ally's unauthorized military action and disruption of the Cold War balance, the United States subsequently exerted strong financial pressure on Britain. At the time, the pound was being shorted by international capital, and the US used the suspension of emergency loans from the International Monetary Fund as leverage to strike at the lifeline of the British economy. Forced by the severe currency crisis, the Eden government ultimately withdrew its troops in a humiliating manner.

Although Britain won a military victory in this war, it completely lost its imperial hegemony. Britain subsequently fell into a chain of decline: allies no longer followed its leadership, creditor nations reassessed its debt risks, and the pound sterling, which had dominated the world for a century, began a long period of depreciation. In the four years following the Suez Crisis, Britain successively granted independence to Ghana, Malaya, Nigeria, and Cyprus; ten years later, Prime Minister Macmillan's "Winds of Change" speech officially declared that the British Empire was shifting from external expansion to strategic retrenchment.

Today, the UK remains a developed economy with a population of nearly 70 million and the fifth-largest GDP globally. It is a member of NATO and the G7, a permanent member of the UN Security Council, and London remains a core global financial center. However, the traditional special relationship between the UK and the US is no longer what it once was.

In March 2026, Dalio directly compared the current US-Iran standoff in the Strait of Hormuz to the Suez Crisis, summarizing a century-old unchanging pattern of great power rivalry: when rising powers clash with established hegemons over key trade routes, the global capital and alliance structure will gradually tilt towards the advantageous side.

He pointed out that the war demands of the US and Iran are completely unequal: Iran sees this war as a game of national survival, while the American public is only concerned with oil price fluctuations and politicians are focused on the midterm elections. Dalio stated, "In war, resilience and endurance are far more important than offensive capabilities." In April, he further upgraded his assessment, publicly stating that the world has entered the early stages of a new round of long-term changes, and that the Iranian conflict is not an isolated event, but a landmark event in the restructuring of the global power, financial, and military landscape.

The 2026 Iran War: Limited Military Victory Exposes Core Strategic Weaknesses

In late February 2026, the US and Israel launched joint airstrikes against Iran. A ceasefire followed, and months of protracted negotiations ensued, but no effective consensus was reached. The US military precisely targeted Iranian nuclear facilities, missile bases, and various military installations, severely damaging the Iranian regime and economy, but failing to completely cripple Iran. The US's predetermined goal of regime change failed, and Iran's nuclear program was not completely and verifiablely dismantled.

As of late June, the US negotiating team was still mediating in Qatar, attempting to reach a memorandum of understanding to lift economic sanctions against Iran in stages in exchange for the restoration of navigation in the Strait of Hormuz. This outcome fell far short of the decisive strategic victory initially envisioned by the US.

The view that the current US-Iran conflict is comparable to the Suez Crisis has become widespread and a hot topic in public opinion, with Ray Dalio being one of the most influential supporters. London School of Economics professor Julia Goerges and senior analyst David Dorsey share this view. However, a prominent Arab media outlet published a commentary in April explicitly refuting this analogy, arguing that while seemingly reasonable, it is highly misleading. The core points of contention are twofold: first, Britain was already showing signs of decline before the Suez Crisis, while the current state of US decline remains controversial; second, while Britain was forced to back down due to pressure from its creditor nations, the only force capable of exerting equal restraint on the US today is China.

The Foundation of Dollar Hegemony: The Petrodollar System and the Debt Crisis

The two core causes of the US recession are the loosening of the petrodollar system and the high level of federal debt. The origins of the petrodollar system can be traced back to a secret agreement in 1974, which was not made public until 42 years later.

The Nixon administration dispatched Kissinger to Saudi Arabia, where a key cooperation agreement was reached: all Saudi oil transactions would be settled solely in US dollars, and Saudi Arabia would continuously invest its oil trade revenue in US Treasury bonds; in return, the US would provide Saudi Arabia with military equipment, aid, and comprehensive security guarantees. Subsequently, all OPEC member countries followed suit, establishing the US dollar's status as the global core currency, and the petrodollar system was formally established.

Former French Finance Minister Giscard d'Estaing called the dollar's global privileges "excessive privileges," while economist Varoufakis likened it to a "global minotaur," satirizing the US for plundering global trade profits through the dollar system. The Strait of Hormuz, then, is precisely the most vulnerable geopolitical node in this hegemonic system.

Weeks after the outbreak of the conflict, the U.S. federal debt surpassed $39 trillion on March 18, 2026. The three major international rating agencies—S&P, Fitch, and Moody's—have all downgraded the U.S. credit rating. Meanwhile, the dollar's share of global foreign exchange reserves fell to 56.9%, a new low since 1995, a significant drop from the historical peak of 72% in 2001.

The dollar's hegemony has not completely collapsed, and it still holds a relative advantage among various risk currencies globally. However, the decline of the British pound can serve as a reference: after the Suez Crisis, the pound did not collapse immediately, but instead experienced thirty years of continuous decline until 1992 when Soros and his team shorted the pound and defeated the Bank of England, thus bringing the decline of the British Empire to a complete end.

Recession does not equal collapse; the US crisis has unique characteristics.

Analysts who accept the Suez analogy acknowledge its limitations. Dalio consistently emphasizes that a US recession is a probabilistic trend, not an inevitable outcome. Currently, the US still possesses three major advantages: the world's largest economy, top-tier military power, and leading cultural influence. In the face of a global crisis, the US dollar remains a mainstream safe-haven asset.

The pound sterling's hegemony took a century to end, finally breaking down after two world wars, the Great Depression, and the Suez Crisis. The dollar's hegemony, on the other hand, began with the Bretton Woods system in 1944, where the US pledged $35 to one ounce of gold, establishing the post-war global monetary order. In 1971, the Vietnam War and domestic welfare spending strained the US treasury, leading Nixon to terminate the gold standard, completely freeing the dollar from its physical asset constraints. Since then, the credibility of American power has become the core support for the dollar, and the petrodollar agreement further solidified this system.

The significance of the 2026 Iran war far exceeds that of ordinary Middle Eastern geopolitical conflicts: the simultaneous superposition of four major risks—the extremely high national debt, the 30-year low in the proportion of dollar reserves, the obstruction of the core oil dollar route, and the polarization of domestic politics in the United States—will significantly reduce the sustainability of the United States' global hegemony.

Dalio's warning hits the nail on the head: "Both the US and Iran know that the ultimate game that will determine the final outcome has not yet arrived."