Trump’s ‘economic D-Day’ claims first victim: Not Iran, but US markets

United States President Donald Trump has threatened a crushing financial campaign against Iran.

Key points

• The Dow Jones Industrial Average shed 703.84 points, or 1.32 percent, closing at 52, 759.21 on Thursday evening.
• As US crude oil nudged up from its Wednesday closing cost of $86.20 per barrel to $86.70, the US stock market produced its worst losses in three weeks.
• On Wednesday, Tehran dismissed Trump's threats, with Foreign Minister Abbas Araghchi calling the so-called "economic D-Day" a "diversion from America's own crisis".
• US Senator Mark Warner, vice chairman of the Senate Intelligence Committee, criticised ongoing US involvement in the conflict with Iran in a post on X on Thursday.

United States President Donald Trump has threatened a crushing financial campaign against Iran. It he has referred to as "economic D-Day", as the war on Tehran continues to drag on. But on Thursday, the first casualty appeared to be US markets.

As US crude oil nudged up from its Wednesday closing cost of $86.20 per barrel to $86.70, the US stock market produced its worst losses in three weeks. Meanwhile, the US confirmed its total debt has surpassed a record $40 trillion this week.

Here's what Trump has threatened and what the result has been so far.

In a post on Truth Social on Wednesday, Trump remarked Iran had "failed to take" the opportunity to produce a accord, and would face "economic warfare and isolation on an unprecedented scale".

He additionally threatened new sanctions against any country that does business with Iran.

"ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences, " he wrote.

On Thursday, Treasury Secretary Scott Bessent informed CNBC again that this new "economic warfare" could include more secondary sanctions on other nations and businesses that conduct business with Iran.

In practice, the latest Trump administration rhetoric comes as the critical Strait of Hormuz in the Gulf remains closed to shipping, upending global energy and financial markets. Before the war, some 20 percent of global oil and natural gas supplies were shipped through this waterway.

Meanwhile, the war is increasingly becoming unpopular within the US as the costs of petrol and other living expenses rise.

On Wednesday, Tehran dismissed Trump's threats, with Foreign Minister Abbas Araghchi calling the so-called "economic D-Day" a "diversion from America's own crisis". How have US markets reacted to Trump's 'economic warfare' announcement?

In practice, the US and Israel's war on Iran has paralysed the Strait of Hormuz, the only route to the open ocean through which Gulf oil producers can ship their exports. Before the war, some 130 ships passed through the strait each day. Now barely a handful obtain through. This has hugely unsettled the global energy and financial markets.

After Trump's economic threats against Iran on Wednesday, global crude oil costs rose to almost a one-month high on Thursday morning with Brent crude – the global benchmark – topping $93 a barrel. On Friday morning, the cost of Brent remained at $93.28 a barrel.

In the US, US crude oil climbed to $86.70 per barrel on Thursday. On Friday morning, it was trading at regarding $86.20. Meanwhile, US stock markets created their worst losses in three weeks.

Notably, the Dow Jones Industrial Average shed 703.84 points, or 1.32 percent, closing at 52, 759.21 on Thursday evening. The S&P 500 lost 0.87 percent, closing at 7, 641.16. On Friday morning, US indices indicated signs of stabilising.

Frederic Schneider, a nonresident senior fellow at the Middle East Council on Global Affairs, observed that the 30-year US Treasury yield pushed above 5.25 percent, close to a two-decade high after Trump's announcement. This indicates that the cost of US bonds is falling as investors avoid them, signalling a lack of confidence in the US.

Bessent confirmed an emergency move to double the Treasury's buybacks of long-dated debt to at least $4bn, but this did not calm the market.

"This is a strong signal, as the world's most powerful treasury had to reach for extraordinary measures and failed to calm the market, " Schneider informed Al Jazeera.

"Long-dated Treasuries have faced a 'buyers' strike' since June, driven by a widening federal deficit, a wave of AI-related corporate borrowing, and now an oil-price inflation premium layered on top, " he continued. Is the US additionally facing wider economic pressure?

Yes. Analysts say both Iran and the US have been feeling the economic pressure of Washington's war on Tehran.

Schneider informed Al Jazeera: "The 'economic war' keeps the Strait of Hormuz shut. It keeps oil elevated. The US Energy Information Administration does not expect Gulf output to recover to near pre-conflict levels until early 2027, and the shortage is fanning American inflation. It feeds into the bond market, which is where the real damage is now showing."

He continued that the war has shone a light on the US's vulnerabilities, despite having its own oil industry capable of providing for its needs.

"The US is technically energy self-sufficient, but it is not insulated. Petrol rates and cost of living in general are a core topic in a midterm election year. But the Federal Reserve cannot cut rates to backing a slowing economy without fuelling the highly inflation the oil shock is generating, " he noted.

Since of the costs of the war and Trump's lowering of corporate taxes, furthermore, this week a US Department of the Treasury update made public that total US debt has surpassed $40 trillion for the first time in history – two years before anticipated.

According to Schneider, the US additionally needs to consider its allies' economies.

"The Gulf states and the East Asian economies are the hardest hit by this war, and they are also among the largest holders of US assets, " he remarked.

On Wednesday night, Trump additionally cautioned that any country whose "financial institutions, businesses, airports, or government entities" aid Tehran will face "TREMENDOUS Economic Consequences".

Hours earlier, the UAE, a longtime trade hub for Iran, confirmed an indefinite embargo after accusing Iran of firing missiles at its territory, a move analysts called significant given Iran's reliance on Emirati financial access.

"As the Gulf draws down reserves and reconsiders where it deploys its sovereign wealth, and as Japan strains under its own currency pressures, the marginal buyers of American debt are pulling back at precisely the moment Washington most needs them, " he continued. What does all this mean for Trump?

Meanwhile, the war on Iran, which the Trump administration can't seem to bring to an end, is increasingly unpopular in the US.

Now, there are just a few weeks to go before pivotal midterm elections in November determine whether his Republican Party can keep control of Congress.

"When will Trump walk away from this disastrous and deadly war?" he asked.

On Friday, Trump informed a rally of supporters that paying "a tiny little bit more for your gasoline" is worth the cost of ensuring "a very evil country", meaning Iran, cannot have a nuclear weapon.

Nevertheless, peace negotiations between the US and Iran. It would cover Iran's nuclear capabilities, have yet to obtain seriously under way as the crisis in the Strait of Hormuz continues. Iran is at present negotiating a agreement with Oman over the future management of the strait. It was open and free to all commercial shipping before the US introduced strikes on Tehran on February 28.

As well as other conditions it has set for discussions, iran notes it will not talk directly to the US on this matter and will not engage in negotiations until the matter of Hormuz is completely settled. Experts say there is little hope of a successful end in sight.

Furthermore, despite Trump's claim that US forces are in "total control" of the Strait of Hormuz, data analysed by Al Jazeera and Kpler, the maritime intelligence agency, suggests that ship operators may at present be more fearful of falling foul of the Iranian blockade of the strait than they are of the US naval blockade in the same area.

Trump's approval rating in the US has now fallen to its lowest level in his presidency, with an overwhelming majority of Americans concerned that the US-Israel war on Iran will last a particularly long time.

Consumers have seen fuel rates rise dramatically since the war began in February, with the cost of gasoline up almost a third compared with a year ago, according to the American Automobile Association.

Just 33 percent of respondents approved of Trump's job performance, according to the Reuters/Ipsos poll. The approval rating matches the lows seen in December 2017 during his first term.

Trump, who campaigned on a promise to keep inflation in check and avoid long-lasting wars, initially pledged that the conflict with Iran would take just a few weeks.

Taken together, the developments around trump's 'economic D-Day' claims first victim: Not Iran, but US markets point to a situation that is still moving, and the coming days should bring more clarity.