We evaluate the loader's behavior when encountering a circular dependency during module initialization.
See the glibc equivalent experiment.
Start: DLL 1 Init
Start: DLL 2 Init
DLL 1, func
End: DLL 2 Init
End: DLL 1 Init
Conclusion: As expected, the Windows loader has no choice but to initialize DLL 2 while DLL 1 could be partially initialized due to a circular dependency. The PE executable format exposes all initialization and finalization tasks as merged into one externally callable EntryPoint and arbitrary code cannot be interrupted or preempted, so the Windows loader's current behavior is the best it can be under the conditions.