The global stock markets are already reeling with the escalation of war in the Middle East, and Iran’s latest warnings exacerbated those tensions.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf said “financial entities that finance the US military budget” should be treated as legitimate targets.
The warning does not explicitly mention Treasury bondholders but is broad enough to unsettle investors.
The developments make the US bond market, long treated as the world’s default shelter in a crisis, suddenly look less comfortable.
In the past few weeks, we are seeing a clear break in the trend as Treasuries have been selling off with the rising intensity of the war.
Treasury yields defy safe haven
The clearest sign of that shift is the move in the 10-year Treasury yield.
The benchmark yield was about 4.05% on March 2, rose to 4.21% by March 11, and reached 4.39% on March 20.
That’s an unusually sharp climb for an asset that normally benefits from flight-to-safety demand during geopolitical shocks.
The major culprit behind the trend is the rising oil prices.
The oil prices soared sharply amid escalating Middle East tensions, and by late March, the war was no longer being treated as a contained regional event but as a direct threat to global inflation.
Inflation expectations have reflected that stress as well.
The 10-year Treasury breakeven rate, a closely watched market gauge of future inflation, rose to around 2.37% to 2.40% in mid-March from 2.25% at the end of February.
SGH Macro Advisors’ Sassan Ghahramani told Reuters that Iran can possibly try “scorched-earth” tactics designed to damage the global economy and force an end to the war.
“Scorched-earth” tactics mean deliberately destroying critical infrastructure, resources, or supply systems so the global economy can’t function normally.
A debt trap inside the war
That question lands at a particularly fragile time for US public finances.
The national debt stood at over $38.5 trillion in January, and CBO-linked projections cited in January put net interest outlays for fiscal 2026 at about $1.039 trillion.
The figure comfortably exceeds national security spending, and that’s where the war story and the debt story start feeding each other.
Higher oil prices lift inflation expectations, which pushes Treasury yields up, and higher yields make it more expensive for Washington to finance both its existing debt and any new military commitments.
The first quarter of fiscal 2026 already offered a preview.
The net interest payments totaled $270.3 billion in October through December, slightly above the $266.9 billion the federal government spent on defense.
Wall Street’s next test
Wall Street is uneasy because this is not the usual crisis script.
Stocks have already been rattled by the war, oil remains elevated, and Treasury yields have moved in a direction that suggests investors are demanding more compensation.
Ian Bremmer, president of Eurasia Group, said in a Bloomberg Television interview that the Iran war was not yet “priced in” to markets.
The warning lands especially hard in bonds, where the next shock may come not from a missed coupon payment, but from the simple realization that geopolitics can now hit America’s financing costs.
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