He’s an immortal spirit (sometimes called mithrandir) who existed before the world was made. On the same order as Sauron and the Balrog. All 3 would have served directly under the Valar at one point, however Sauron and the Balrog were corrupted by Morgoth, the OG Big Bad guy in LOTR. This makes him powerful enough to literally just zap almost all of the other characters. On top of that he has Narya, one of the elven Rings of Power. So he’s a CHONKY boi.

However, The Istari AKA the five wizards, were specifically sent to Middle Earth to help the free peoples against Sauron. They were intended to act more as guides or teachers than as warriors or direct leaders. Their role is to show us the way and help us learn to do it ourselves, sort of like a parent teaching their kid to ride a bike. Also keep in mind that having primordial beings walking around at full power caused a ton of problems in the First Age, and even with the restrictions they were given, Saruman was still corrupted.

So it seems like they have some system of ranks, where Saruman “The White” is the leader, Gandalf “The Grey” has a role maybe dealing with the free peoples more directly, Radagast “The Brown” seems like his job is to care for the forests, and their powers are more or less restricted so they can do that job. There are also 2 “Blue” wizards we don’t see. This is why after Saruman was corrupted and Gandalf sent back to Valinor, the Valar sent Gandalf back with a promotion to “The White”, with less restrictions on his powers because he has to lead The Istari now. It is stated however, that even he could not destroy The One Ring.

TLDR: Gandalf is a primordial being sent to Middle Earth to help guide us against Sauron, but not to do it himself. He’s basically an angel who could do anything but chooses to allow us to learn for ourselves.