UBS Warns Iran Conflict Is Destabilizing U.S. Debt
UBS is warning that the Trump administration's military action against Iran is creating “wobbles” in U.S. government debt markets. The firm points to surging deficits and defense spending as key drivers of fiscal instability that could be worsened by a prolonged conflict.
The current conflict escalated on February 28, 2026, when joint U.S.-Israeli military strikes killed Iran's Supreme Leader Ali Khamenei. Iran retaliated by launching missile and drone attacks against Israel, the UAE, Qatar, and other nations in the Middle East hosting U.S. military bases. As of March 2, the U.S. military has confirmed four American service members killed in action. The Iranian Red Crescent Society reports that strikes from the U.S. and Israel have hit 131 cities, resulting in at least 555 deaths within Iran. This new military spending comes as the U.S. national debt exceeds $38.8 trillion, a debt-to-GDP ratio of 136%. Even before the conflict, the national debt was growing at a rate of roughly $1 trillion every 100 days. President Trump's administration had already passed the "One Big Beautiful Bill Act," which the CBO estimates will add $3.4 trillion to deficits over a decade. Furthermore, the White House has proposed a record $1.5 trillion defense budget for fiscal year 2027. The conflict is causing immediate economic disruption beyond government debt. Iran has attacked a major Saudi oil refinery and threatened to close the Strait of Hormuz, a key transit point for 20% of the world's petroleum. In response to attacks on its facilities, QatarEnergy has halted its production of liquefied natural gas, removing a top global supplier from the market. President Trump stated the U.S. objectives are to annihilate Iran's navy and destroy its missile capabilities. He has suggested the military operation could last four to five weeks but has the "capability to go far longer," and has not ruled out sending ground troops.
