The US is losing its grip on global power – Ninety One

Views and opinions about a new world order in which the US and its military might play a lesser role have been around for years, if not a decade.

Lately, these forecasts are being backed by in-depth research and voiced by people worth listening to.

The reality is that the US is in worse shape than it was several decades ago. A gradual shift away from dollar-based trade has gained momentum, US Treasury bonds are no longer seen as the world’s safest investment, and the war in Iran has dented the belief that the US is the ultimate military power.

Read:

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Malcolm Charles, portfolio manager at global asset manager Ninety One, unpacked this new world scenario at the recent Old Mutual ‘Investival 2026’ investment conference, backing his argument with research and analysis.

He says the US, under President Donald Trump, has miscalculated the impact of the war in the Middle East, with events unfolding very differently from what had been envisaged.

“What Trump has done to the world, I think, we will pay for for generations to come. This four-day war that he started six-and-a-half months ago really has been a complete miscalculation and disaster.

“It is going to be so damaging because it’s not just him and Iran fighting, there are many other parties involved and so many countries that unfortunately have had their trajectory shifted.

“I honestly can’t see how that trajectory can come back again.”

Research, not opinion

Charles noted that the views he shared with guests at the conference are based on research conducted by the Ninety One team.

“First and foremost, Trump is getting to a quite desperate stage to finish this war. There are three elements that could force his hand, or three 3 Ms: munitions, midterms, and markets.

“Until recently, the markets were not a big worry as the AI bubble disguised any effect that the oil price had on other markets. The huge surge in [equities] that Trump is going on about removed the worries.

“The bond market, however, has changed its mind and has caused quite a bit of panic in the White House. No one was focusing on the $40 trillion debt that the US has.

“It was mentioned, but it wasn’t the focus. Now, it is everyone’s focus.

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“They are going to pay $1 trillion in interest this year, more than their defence spending. It’s quite a scary number.”

Charles adds that the world is watching US markets, US debt and the trajectory of the dollar closely.

The midterm elections are another worry, given the sharp decline in Trump’s popularity and the impact of the war on inflation and energy costs.

Ammunition pressures

Charles says shortages of military hardware and ammunition needed to prolong the war in Iran are growing problems.

Read: US to spend billions to power army bases with nuclear reactors

“The US spent most of their defence missiles. Now they’re only playing with drones. There are no real major strikes.

“There is no quick turnaround,” he says, adding that US factories cannot produce air-defence missiles fast enough.

“If they produce missiles for the next two years – and keep every single missile – they will have less than before the war started.”

“To me, the sad part is the other parties involved. The Gulf states are probably the worst affected of all. People don’t actually think about second-order things. They only think Iran and America must finish this thing.

“The Gulf States have changed. Their entire world has changed. They attracted the best of the best and the brightest people. They had the best airline hubs.

“Everything was working fantastically well, whether it’s Dubai or Abu Dhabi,” says Charles.

Read: South Africa taps Gulf know-how for $9.5bn property plan

“It really was a hub of investment, replaced by uncertainty,” he adds, recounting a story of Ninety One employees running to shelters when air-raid sirens blared in these rich and once-peaceful countries.

Tolling the Strait of Hormuz

Charles says there is a risk that Iran could emerge as a much more powerful force in the Middle East, creating further fear and uncertainty across the region.

“Iran has never really got on very well with the rest.”

Moves by Iran to monetise the Strait of Hormuz by introducing a toll on oil tankers could further shift the balance of power in the region.

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“What they are going to do is the same as the Suez Canal and the Panama Canal. You will have to pay a toll to go through.

“We estimate that if you put a dollar on every barrel of oil that goes through, they will collect a couple hundred billion dollars a year.

“Iran will become the richest state in the Middle East by a country mile,” he says.

“Unfortunately, in the past, what have they done with the money? They haven’t exactly spread it amongst their people. They will become a military might again.

“Israel can’t afford that, the Gulf states can’t afford that, and America certainly can’t.”

But it’s already happening. Charles says Iran and Oman are in talks.

“They were meant to have a meeting [on Tuesday] with the Gulf states about how they were going to do it [apply the toll], but the meeting was cancelled.”

Power shifts

The geopolitical shifts are far-reaching, with Russia, China and emerging markets among those benefitting.

“Russia is benefitting from the changes in the war in Ukraine. You would have noticed that there are many, many more attacks on Ukraine soil now, because all those defence missiles that were going to Ukraine aren’t going [there] any more.

“When Russia attacks now, quite a few more are getting through because America is distracted. Ukraine is actually in a bit of a pickle,” says Charles.

Read:
Markets can handle a hawkish Fed, not uncertainty
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Donald Trump has made $2.2bn in his second term

Ninety One concludes that China stands to benefit the most from the upheaval.

“I think China will come out of this on top. China, bizarrely, is the adult in the room. They have quietly just done the right thing.

“Number one, they stockpiled millions and millions of barrels of oil before the war, so they didn’t have to panic when the Strait of Hormuz was closed,” says Charles.

“The other way China benefits is in the export of solar panels, increasing by a quarter. They’ve exported an extra $25 billion of solar panels and batteries to Africa and Asia every single month in the last six months. They just play both sides and gain.

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Read: The world crossed a major solar milestone – no one noticed

“China is playing diplomatically and staying out. But, when they decide the war’s over, they will step into Iran and say ‘enough now’.

“China will be seen as a peacemaker, almost as a global world leader,” says Charles.

“This is how superpowers evolve.”

Currencies

On top of it all, the world is realising that it is overexposed to the US dollar.

“Gulf states and all those sovereign wealth funds have realised that their biggest mistake over the last 10 years was that they were all overexposed to the US.

“They want to trim down their dollar holdings. And we are having the exact same conversations with the big endowment funds in America,” he says.

Then comes the good news for South Africa. “Ask yourself why emerging-market currencies have done so well,” says Charles.

“These guys are slowly starting to trickle into emerging markets. The best-performing asset class over the last 18 months has been EMFX [emerging-market foreign exchange].

“It is for good reason. We [emerging-markets] listened to the International Monetary Fund, the World Bank and the Washington Consensus, and all of us have got our budget deficits under control.

“We are doing the right thing, whereas all the developed markets have done the exact opposite. US debt is at 125% of GDP, and the UK has gone from 80% to 95%.

“They are all just running up their debt and spending like crazy, becoming less sustainable going forward,” says Charles.

“Investors are saying they don’t want to be part of that any more.”

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