The post-WWII order is fracturing — across multiple theaters, simultaneously.
The post-1945 international order is not transitioning — it is fracturing. The distinction matters. A transition implies an orderly handoff from one stable configuration to another. What is happening instead is simultaneous destabilization across multiple theaters, with no clear successor architecture emerging. Ukraine is the largest land war in Europe since 1945. Iran and the broader Middle East have escalated into open military conflict, threatening the Strait of Hormuz — the chokepoint through which 20% of global oil transits daily. Houthi forces have disrupted Red Sea shipping, forcing 80% of container traffic to reroute around Africa. Taiwan Strait tensions continue to build. These are not isolated crises. They are symptoms of a system that has lost the capacity to contain conflict within manageable boundaries.
The institutional dimension is equally significant. BRICS has expanded to represent 45% of the world's population and roughly 37-40% of global GDP on a purchasing-power-parity basis — exceeding the G7. Global defense spending has reached all-time highs, with the steepest year-on-year increases since the Cold War. US-China trade has decoupled 22% from its peak. The vast majority of trade among Shanghai Cooperation Organisation nations now bypasses the dollar entirely. Central banks are buying gold at record pace — the strongest non-verbal signal that sovereigns are hedging against the order they nominally support.
The physical infrastructure of the global economy has become a strategic vulnerability. Energy chokepoints — the Strait of Hormuz, the Suez Canal, the Malacca Strait — are no longer theoretical risks but active conflict zones. The US Strategic Petroleum Reserve has been drawn down to its lowest level since 1984, leaving less buffer against supply disruptions. A single day of Hormuz closure could spike oil 30-50%. This isn't a financial abstraction — it's $10 per family per day, immediately, with cascading effects through inflation, fiscal policy, and political stability.
What each metric measures, why it matters, and what the current reading tells us.
Central bank gold purchases are the most significant geopolitical demand signal because they represent strategic, long-duration allocation decisions by sovereign institutions. The trend is structural: central banks in emerging markets are diversifying away from dollar-denominated reserves and toward a neutral, apolitical asset. The acceleration began after the freezing of Russian central bank reserves in 2022, which demonstrated to every non-aligned nation that dollar-denominated reserves could be confiscated for geopolitical reasons. Gold's share of global foreign reserves has risen significantly as Treasuries' share has declined.
The current military spending surge is the largest since the Cold War, driven by the war in Ukraine, new NATO spending benchmarks, US-China competition, and Middle Eastern escalation. But the more significant trend is the rapid increase in spending by European and Asian allies. The fiscal implications for European governments — already dealing with aging populations and welfare state obligations — are enormous. This level of military spending reallocates resources from domestic investment to defense, compounding existing fiscal pressures across the Western alliance.
The number of major active military conflicts involving great powers or their proxies has reached its highest level since the Cold War. Ukraine represents the largest land war in Europe since 1945. The Iran conflict threatens the most critical energy chokepoint on earth. Houthi Red Sea operations have disrupted a trade route carrying 12-15% of global commerce. The system's inability to resolve or contain any of these conflicts while new ones emerge is itself the signal — it indicates structural overextension of the security architecture that maintained relative stability since 1991.
Approximately 20% of the world's daily oil consumption passes through a single waterway between Iran and Oman, roughly 21 miles wide at its narrowest point. This concentration risk has existed for decades but was manageable when the Middle East was relatively stable and the US maintained overwhelming naval supremacy in the region. Both conditions have eroded. With active military conflict in Iran and Iranian naval assets positioned along the strait, the risk of disruption — whether intentional or accidental — has moved from theoretical to operational. Even a partial disruption would produce the kind of oil price shock seen in the 1973 embargo.
The SPR was created after the 1973 oil embargo specifically to buffer against supply disruptions. It peaked at 727 million barrels in 2009. The drawdown to 394 million barrels — the lowest since 1984 — reflects both the 2022 release to manage gasoline prices and the failure to adequately refill. At current consumption rates, 394 million barrels represents roughly 20 days of imports. The reserve was designed for exactly the scenario now unfolding: a major Middle Eastern conflict threatening energy supply. Its depleted state means the US has significantly less capacity to absorb a supply shock than at any point in the last four decades.
The decline in bilateral trade reflects deliberate decoupling across multiple sectors. Technology export controls, semiconductor restrictions, and investment screening have accelerated the separation of the world's two largest economies. The concept of 'friendshoring' — relocating supply chains to aligned nations — is producing new trade corridors while weakening old ones. The decoupling is most advanced in technology and energy, with financial decoupling as the next frontier.
BRICS now represents a larger share of global GDP than the G7 on a purchasing-power-parity basis — a milestone crossed in 2023. The expansion adds strategic depth: with recent members, BRICS controls a significant share of global oil and gas production and spans every major region. The New Development Bank is preparing to issue bonds in multiple local currencies, explicitly diversifying away from dollar-denominated financing. Whether BRICS consolidates into a genuine institutional counterweight or remains a loose diplomatic forum will be determined by its next phase of development.
How this dimension looked during previous crisis periods.
The interwar period marked the final decline of British global hegemony. Britain's share of world manufacturing had fallen precipitously over decades. The pound sterling was being displaced as the primary reserve currency. The League of Nations failed to prevent aggression. Today's dynamics — a dominant power's relative decline, the rise of challengers, the weakening of multilateral institutions, and increasing resort to bilateral power arrangements — mirror the 1930s more closely than any subsequent period.
The 1973 Arab oil embargo demonstrated that energy could be weaponized as a geopolitical tool with devastating economic consequences. OPEC's production cuts triggered a 300% oil price increase, stagflation across the Western world, gas lines in American cities, and a fundamental restructuring of energy policy. The embargo created the Strategic Petroleum Reserve, reshaped US Middle East policy for fifty years, and demonstrated that physical supply disruptions cascade through the entire economy within days. The current Middle Eastern conflict threatens the same chokepoints — but with the SPR already depleted and global supply chains more interconnected than in 1973.
The 1970s saw the creation of the petrodollar system, in which Saudi Arabia agreed to price oil exclusively in dollars in exchange for American security guarantees. This recycled Middle Eastern oil revenues into US Treasury bonds, creating artificial demand for dollars and enabling the US to run persistent trade deficits without currency consequences. The current erosion of this arrangement — through Saudi engagement with BRICS, alternative currency oil contracts, and the structural decline of oil demand from EV adoption — threatens a pillar of dollar hegemony that has been operative for 50 years.
The Global Financial Crisis marked the moment when China emerged as a systemic rival rather than a development partner. China's stimulus response was larger relative to GDP than America's, its recovery was faster, and its growing confidence produced more assertive foreign policy. The Belt and Road Initiative, launched in 2013, was the first large-scale infrastructure program designed to create an alternative to Western-dominated trade and investment networks. Everything that has followed — BRICS expansion, alternative payment systems, de-dollarization — represents the maturation of forces that became visible in 2008.
Perspectives from the major cycle and macro thinkers.
Dalio's Big Cycle model identifies the current period as a classic great power transition, with the US facing a rising challenger while dealing with internal disorder and fiscal strain. He emphasizes that these transitions historically involve trade wars, technology wars, capital wars, and sometimes military conflict. He warns of scenarios analogous to the freezing of Japanese assets before World War II, noting capital wars as an increasingly visible dimension of competition.
Pozsar argues the global monetary order is shifting from one backed by financial assets (US Treasuries) to one backed by physical commodities — oil, gas, metals, food. In this framework, the Strait of Hormuz isn't just an energy chokepoint; it's a monetary chokepoint. Whoever controls commodity flows controls the new collateral base. The weaponization of reserves (Russia 2022) accelerated this transition by proving that financial assets can be confiscated but physical commodities cannot. Central bank gold buying is the visible edge of this structural shift.
Gromen argues that countries like China, Russia, and India are forcing gold back into the international monetary system as a neutral reserve asset to replace Treasuries. He sees the transition as structural and irreversible, warning that the US cannot sustain economic confrontation without eventually imposing capital controls — which would mark a dramatic escalation in the fracturing of the global financial system.
The Strauss-Howe framework observes that Fourth Turnings historically climax with major geopolitical confrontation. The American Revolution, the Civil War, and World War II each involved existential external conflict. The framework does not predict the specific form but suggests that some form of decisive geopolitical event is likely before the current cycle resolves.
Leading indicators that could shift this score.
Any sustained disruption to Hormuz transit — whether through Iranian naval action, mine deployment, or insurance market refusal — would produce the most severe energy shock since 1973. Oil prices could spike to $150+ per barrel within days. The cascading effects through inflation, consumer spending, fiscal policy, and political stability would touch every other lens in the Crisis Index. The insurance market's willingness to cover tanker transit is a leading indicator.
Any military escalation around Taiwan would be the most consequential geopolitical event since World War II. China's military spending trajectory, naval exercises, and diplomatic signaling are leading indicators. Watch also for US semiconductor policy and TSMC's expansion of manufacturing outside Taiwan as hedging behavior.
Whether BRICS consolidates its expansion, establishes formal membership criteria, and advances operational alternatives to dollar-based systems will determine whether the bloc becomes a genuine institutional counterweight or remains a loose diplomatic forum. India's presidency and the potential admission of additional major economies are key variables.
If NATO members move seriously toward dramatically higher GDP spending targets, it would represent the largest sustained military buildup in the Western alliance's history. The fiscal implications for European governments — already dealing with aging populations and welfare state obligations — would compound existing domestic pressures and reshape the global security environment.