Kathmandu— US President Donald Trump has threatened a significant escalation of financial pressure on Iran, labeling it “economic D-Day,” amid an ongoing conflict. However, the first major repercussions of this strategy are being felt not in Tehran, but within US financial markets, with stock values plummeting and national debt exceeding $40 trillion this week. The situation is further complicated by disruptions to global energy supplies due to a blockade of the Strait of Hormuz, rising fuel prices, and growing domestic discontent as midterm elections approach.

Market Reaction to Economic Threats

Following Trump’s announcement of impending “economic warfare” against Iran on Wednesday, US stock markets experienced their worst losses in three weeks. The Dow Jones Industrial Average shed 703.84 points, closing at 52,759.21 on Thursday evening, while the S&P 500 fell by 0.87 percent to close at 7,641.16. US crude oil prices also rose, reaching $86.70 per barrel on Thursday before stabilizing around $86.20 on Friday morning. Frederic Schneider, a nonresident senior fellow at the Middle East Council on Global Affairs, noted that the 30-year US Treasury yield pushed above 5.25 percent – near a two-decade high – indicating investor avoidance of US bonds and a lack of confidence in the American economy.

Strait of Hormuz Disruptions

The conflict has effectively paralyzed shipping through the Strait of Hormuz, a critical waterway for global oil supplies. Prior to the war, approximately 130 ships transited the strait daily; now, barely a handful are able to pass. This disruption has significantly unsettled both energy and financial markets, contributing to elevated crude oil prices. The US Energy Information Administration does not anticipate Gulf oil output returning to pre-conflict levels until early 2027, exacerbating inflationary pressures within the United States.

Wider Economic Pressures on the US

Analysts point out that both Iran and the US are experiencing economic strain as a result of the ongoing conflict. Schneider explained that the closure of the Strait of Hormuz keeps oil prices elevated, fueling American inflation and impacting the bond market. He also highlighted that the war has exposed vulnerabilities in the US economy despite its energy self-sufficiency, noting that rising fuel costs are a key concern during a midterm election year. This week’s announcement that US national debt has surpassed $40 trillion – two years ahead of schedule – further underscores these economic pressures.

Political Fallout and International Reactions

The war is becoming increasingly unpopular within the US, particularly as living expenses rise. Senator Mark Warner criticized continued US involvement in the conflict, questioning when Trump will seek to end it. Despite this, Trump defended his policies at a recent rally, stating that slightly higher gasoline prices are a worthwhile cost to prevent Iran from acquiring nuclear weapons. Meanwhile, the UAE announced an indefinite embargo on Iranian trade following accusations of missile attacks, signaling a broader regional shift in response to the conflict.

Peace talks between the US and Iran remain stalled, with Iran insisting on resolving issues related to the Strait of Hormuz before engaging in direct negotiations. Experts express little optimism for a swift resolution as ship operators appear more concerned about Iranian blockades than US naval presence.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.