UBS Warns Iran Conflict Threatens U.S. Debt
The escalating conflict with Iran poses another risk to U.S. government debt, warns UBS. The bank highlights that rising defense spending on top of existing deficits could undermine investor confidence in U.S. Treasuries and the dollar, adding to fiscal pressures.
The U.S. national debt currently stands at over $38.8 trillion as of March 2026, a figure that has been climbing by roughly $1 trillion every 100 days. This has pushed the country's debt-to-GDP ratio to an estimated 136%. This massive debt is a result of consistent annual budget deficits, which reached approximately $1.8 trillion in the 2025 fiscal year. During that period, the government spent about $1.34 for every dollar it collected in revenue. A major consequence of this borrowing is the escalating cost of interest. In fiscal year 2025, net interest payments on the debt surpassed $1 trillion for the first time, a figure that now exceeds the nation's entire defense budget. Historically, involvement in military conflicts has been a primary driver for spikes in the national debt. Unlike the Korean War, which was funded mainly by tax increases, the wars in Iraq and Afghanistan were financed almost entirely by borrowing, leading to a significant run-up in debt. Confidence from foreign investors is crucial, as they hold over $9 trillion of U.S. government debt. Japan is the largest foreign creditor with $1.2 trillion in holdings, followed by the United Kingdom. Meanwhile, China has been actively reducing its share, which has fallen to the lowest point since 2008.
