Dictators often wear military uniforms. The armor just takes it one step further.
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Not the strongest argument. I don't think that anyone would have an issue with the armor. And no the armor isn't one step further than a military uniform. Imagine how silly those medals would look on the outside of an iron man suit. Back to the cape/cloak, it is highly impractical. It isn't there to conceal anything. It's not there to enable flight or gliding. It isn't bulletproof or as durable as his armor. The hood would block his peripheral vision. The cape would be unwise to wear with jet boots. So the remaining explanation is that it's for fashion. This version of Iron Man wants to look pretty. Or he's embarrassed about his armor and wants to cover it up. I hope it's a ceremonial robe of some sort.