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While Gandalf is a powerful Maia spirit, he is limited in his physical form. He is not immune to fire, unlike the Balrog, which could put him at a significant disadvantage against Smaug. In a direct confrontation, it is easy to foresee that even the slightest fiery breath from the dragon could incapacitate Gandalf.
Furthermore, Gandalf's physical body, described as human-like and aged, possesses vulnerabilities that render him susceptible in combat situations. Throughout "The Hobbit," Gandalf is shown to prefer strategic thinking over brute force, often choosing to avoid direct confrontations.