Fund Manager Warns Of Rising Odds Of 'Much More Horrific Hot' World War In Wake Of Israeli-Hamas Conflict

As the Russia-Ukraine war rages on, another one has come to threaten the global geopolitical and economic order. The crisis in the Middle East involving Israel and Hamas has increased the odds of a world war, Ray Dalio, the founder of asset management firm Bridgewater Associates, said in a LinkedIn post on Thursday.

What happened: The conflict between Israel and Hamas as well as the Russia-Ukraine war reveal the “unimaginably terrible and revolting ways people can and do treat other people — especially innocent civilians,” Dalio said in the post. He also expressed relief that major powers, namely the U.S. and China, have not engaged in hot wars but believes they are at the brink of one.

Images of civilian casualties in the Middle East “will lead to new conflicts both between countries and within countries,” the hedge fund manager said. “This war has a high risk of leading to several other conflicts of different types in a number of places, and it is likely to have harmful effects that will extend beyond those in Israel and Gaza,” he said.

Dalio added “the odds of transitioning from the contained conflicts to a more uncontained hot world war that includes the major powers have risen from about 35% to about 50% over the last two years.”

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How The Two Ongoing Wars Will Likely Transpire: The two wars show that the warring factions have crossed the lines from “contained pre-hot-war conflicts” to “uncontained hot wars,” Dalio said. If these wars spread to other countries, especially “the major countries, there will be much more horrific hot world war,” he said.

“It seems to me that the Israel-Hamas war is another classic, unfortunate step toward a more violent and encompassing international war,” Dalio said. Drawing upon history, he said these conflicts move from being contained to being “all-out brutal wars” that will likely continue until the other side is “clearly defeated” and will spread to involve more countries.

These wars, Dalio said, are part of the “bigger great power conflicts to shape the new world order,” having a major effect on allies and enemies of all four sides. These two wars will also cost the allies of these countries a lot, he added.

Dalio Offers Resolution Tips: World leaders should recognize that “having hot wars is the worst possible thing to happen and that working together on creating a path and processes for minimizing the chances of a hot war developing is the best thing they can do,” Dalio said.

He suggested that the U.S. and China jointly broker peace in Ukraine. “If they did that, maybe they could develop a dynamic that would bring about peace rather than conflict in other cases,” he added.

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