Trump's Iran Economic Threat Backfires on US Markets
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- Trump threatened Iran with 'economic warfare and isolation on an unprecedented scale,' including secondary sanctions on any country whose financial institutions, businesses, or airports provide 'any type of lifeline' to Tehran, after Iran 'failed to take' the opportunity to make a deal.
- US stock markets posted their worst losses in three weeks: the Dow Jones Industrial Average shed 703.84 points (1.32%) to close at 52,759.21, while the S&P 500 dropped 0.87% to 7,641.16.
- The 30-year US Treasury yield pushed above 5.25%, close to a two-decade high, as investors pulled back from US bonds — a 'strong signal' that even the Treasury's emergency doubling of long-dated debt buybacks to at least $4 billion failed to calm markets.
- Total US debt surpassed a record $40 trillion for the first time, two years earlier than projected, driven by war costs and Trump's corporate tax cuts.
- The Strait of Hormuz remains effectively closed — down from roughly 130 ships daily before the war to barely a handful — with Brent crude topping $93 a barrel and the US Energy Information Administration not expecting Gulf output recovery until early 2027.
- The UAE announced an indefinite embargo on trade with Iran after accusing Tehran of firing missiles at its territory, a blow analysts called significant given Iran's reliance on Emirati financial access; Iran dismissed Trump's threats as a 'diversion from America's own crisis.'
- Trump's approval rating fell to 33%, matching lows from December 2017, with gasoline prices up nearly a third year-over-year and midterm elections weeks away.
Why it matters: Trump's economic warfare was designed to squeeze Iran, but the closed Strait of Hormuz and secondary-sanctions threats are rattling the very US bondholders and Gulf/Asian partners Washington relies on. With US debt past $40 trillion, a 30-year yield near a two-decade high, and midterms weeks away, the pressure Trump meant to apply abroad is now feeding domestic inflation and eroding the financial credibility he needs voters to sustain.
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