PNN – Global and regional economic sources link the U.S. Treasury crisis to the consequences of a war with Iran.
According to the report of Pakistan News Network; when Donald Trump—the current U.S. President—ran for office in 2024, he pledged to eliminate the federal budget deficit and pay off U.S. debt; by the time he assumed power in January 2026, the national debt stood at $36.2 trillion.
US Faces Unprecedented Budget Deficit; Debt Surpasses $40 Trillion
Examining the impact of a potential war with Iran on the US Treasury’s crisis, the Qatari website Al-Araby Al-Jadeed reported that, according to estimates by the Congressional Budget Office—an independent, nonpartisan agency—Donald Trump’s policies have resulted in an additional $3.8 trillion in debt over a period of just over a year and a half. Furthermore, the projected budget deficit has exceeded $2 trillion, a figure equivalent to more than 6% of US Gross Domestic Product (GDP).
The danger of this massive deficit—which has more than doubled compared to previous years—lies in the fact that such persistent deficits have historically been seen only during times of war or financial crisis; yet, the U.S. economy is not currently experiencing a crisis.
With the announcement this week that the U.S. national debt has reached $40 trillion, investors have grown concerned, linking this figure to worries about a potential war with Iran, inflation, massive spending on artificial intelligence, and rising public debt across the United States, Europe, Japan, and Canada.
Amidst this, uncertainty surrounding decisions by the Federal Reserve—responsible for formulating monetary policy and pursuing full employment, price stability, and economic growth in the U.S.—further exacerbated these concerns, pushing the yield on 30-year Treasury bonds above 5.3 percent (the highest level since the 2008 global financial crisis) before it retreated to 5.18 percent.
On Wednesday, U.S. Treasury Secretary Scott Bessent—a former currency trader—undertook an unusual intervention to curb the sharp rise in long-term government bond yields by doubling the volume of bonds being repurchased. However, markets largely disregarded these government efforts on Thursday.
The U.S. Treasury also announced that, just two weeks after unveiling its purchase plan for the current quarter, it would double the minimum size of its buyback program for bonds with maturities ranging from 10 to 30 years.
The Role of Trump’s Reckless Policies in the Bond Market Crisis
However, the Trump administration’s economic policies over the past few months—particularly its failure to implement a previously promised plan to reduce borrowing—have exacerbated the situation; despite the Treasury Secretary’s efforts to reassure bondholders, bond yields have risen once again.
Economic sources have reported that a significant portion of the problem facing the volatile U.S. bond market stems from the volume of debt, which has reached $40 trillion.
Amid this situation, the current U.S. administration under Donald Trump is attempting to blame the previous administration—that of Joe Biden—for the high debt and government budgetary issues; however, Trump himself admitted in an interview with Newsmax that his policies regarding tariffs and tax cuts have exacerbated the problem.
Furthermore, the Congressional Budget Office estimated that Trump’s massive tax-cut bill would add $4.7 trillion to the national debt over a ten-year period.
Investors hold approximately $32 trillion of the United States’ total $40 trillion debt. When interest rates rise, Washington’s borrowing costs increase because the yield on 10-year Treasury bonds typically dictates the direction of consumer interest rates—including those for mortgages, corporate debt, auto loans, and student loans—while the yield on 30-year Treasuries moves in tandem with the 10-year yield, exacerbating affordability challenges across the entire economy.
The U.S. Treasury Secretary is attempting to prevent government borrowing costs from rising to destabilizing levels by doubling the size of the planned public debt buyback program.
However, while bond yields fell to 5.18%—still a high level—analysts warned that the effects might be short-lived and that the Treasury Secretary has limited tools to control interest rates.
Lawrence Gillum, chief strategist at LPL Financial, described the move as more of a symbolic gesture than a practical solution.
He told The Washington Post that the scale of the buyback program does not significantly impact the roughly $32 trillion Treasury bond market; however, it signals that the Treasury is monitoring the situation and will make every effort to prevent a rapid and dramatic spike in yields.
The Impact of Potential War with Iran on the U.S. Treasury Crisis
Meanwhile, Amjad Atieh, a financial markets expert based in New York, told Al-Araby Al-Jadeed that rising borrowing costs for the U.S. government would lead to a general increase in interest rates, exerting a significant negative impact on the U.S. economy across all sectors.
He added that, as a result of this situation, the real estate sector would be affected by rising borrowing costs for home purchases, and stock markets—a primary source of income for a large segment of Americans—would plummet. Consequently, the government might be forced to cut back on social support programs, which would negatively impact low-income groups in the United States.
This Arab economic expert emphasized that the war with Iran has impacted the U.S. economy, noting that the rise in military spending to support combat operations has cost the U.S. budget hundreds of billions of dollars. Furthermore, rising energy prices have fueled inflation and made it more difficult for the Federal Reserve to lower interest rates and reduce the national debt.
He pointed out that with the U.S. national debt surpassing $40 trillion, there is growing concern in global markets regarding the U.S. government’s ability to meet its financial obligations without printing new money—a move that could lead to further inflation.