On March 9, 2026, at the Trump National Doral Resort in Doral, Florida, President Donald Trump leaves after speaking at a meeting of Republican lawmakers.

At this time, the war in Iran continued to escalate, gasoline prices across the country rose, and the US economy was mired in a double quagmire of war expenses and debt crisis—this war in Iran, which cost nearly $1 billion a day, was pushing the already out-of-control US national debt to an even more dangerous edge.

Pre-war warning: The fiscal predicament of runaway national debt

Before the joint US-Israeli airstrikes on Iran, US finances had already entered an unsustainable track, with the national debt expanding at a rate that broke historical records.

Before the first wave of munitions struck Tehran, the federal debt had already surpassed the $38 trillion mark, and it surged by $1 trillion in just two months from August to October 2025, setting a record for the fastest debt accumulation outside of the pandemic.

Michael A. Peterson of the Peter G. Peterson Foundation warned last October that the growth rate of U.S. national debt had doubled since 2000, posing a huge hidden danger for the financial pressure brought by subsequent wars.

War is expensive: the heavy burden of military spending of 1 billion per day

Operation Epic Fury is generating astronomical military spending.

According to estimates by the Washington-based think tank Center for Strategic and International Studies (CSIS), the military operation cost as much as $891.4 million per day. CNN, citing its report, said that $3.7 billion in military spending was consumed in the first 100 hours of the conflict alone.

The enormous expenses stem from the heavy deployment of air and naval forces: air operations cost an average of $30 million per day, and naval operations add another $15 million; the daily maintenance of carrier strike groups requires an average of $6 million, and the deployment of equipment such as stealth bombers costs an additional several million dollars.

Kent Smetes, director of budget modeling at the Wharton School of the University of Pennsylvania, predicts that a two-month war could cost taxpayers up to $95 billion and further accelerate the pace of U.S. debt.

Deep-seated debt problems: a concentrated outbreak of multiple hidden dangers

Before the war, the United States was already mired in a deep and intractable debt crisis. Currently, the government's annual debt interest payments are approaching $1 trillion, exceeding the combined defense and healthcare spending.

The ongoing partial government shutdown has not only added billions of dollars in short-term costs, but has also brought core economic activity to a standstill. Credit rating agencies have downgraded the United States’ top credit rating due to the political gridlock and fiscal slump.

The war-induced volatility in the global oil market has further impacted fragile fiscal systems—oil prices experienced their most volatile trading day in history, briefly touching $120 per barrel on Monday, and the uncertainty surrounding energy prices has exacerbated the difficulty of fiscal planning.

Short-term shocks: The dilemma between inflation and interest rate cuts

The intertwining of war and debt has brought immediate shocks to the US economy.

The de facto blockade of the Strait of Hormuz has disrupted the logistics of 30% of global oil consumption and 20% of liquefied natural gas supply. If the conflict is resolved within a few weeks and energy facilities are not permanently damaged, oil prices may temporarily stabilize in the $100/barrel range.

Morgan Stanley chief economist Michael Gappen predicts that this will push overall inflation up by 35 basis points in the coming months, and the current situation of inflation remaining above the policy target may force the Federal Reserve to postpone its plans to cut interest rates this year, thereby increasing debt repayment pressure.

Long-term projection: The economic puzzle under the shadow of recession

A more severe, prolonged conflict scenario would have catastrophic consequences.

If the war drags on for several months, oil prices could surge to $130 per barrel. Morgan Stanley estimates that if the continued supply shock causes oil prices to double this year, the US real GDP growth rate will be dragged down by 1.5 percentage points.

This scenario would trigger a large-scale "uncertainty shock," suppressing corporate investment, freezing hiring activities, and forcing households to significantly reduce consumption.

Given the high debt level, the Federal Reserve may be forced to abandon its anti-inflation target and try to save the economy through aggressive interest rate cuts, which would further weaken the dollar's credibility and push up debt financing costs.

Quantitative analysis by Thorsten Slok, chief economist at Apollo Global Management, shows that the effects of the ongoing shock will continue until the end of 2027.

Endgame Dilemma: An Unsolvable Double Strangulation Cycle

The financial markets remain relatively calm, primarily because the market generally believes that President Trump is highly sensitive to stock market sell-offs and will do his utmost to avoid a prolonged conflict.

However, the reality is that war spending and debt growth have created a vicious cycle: the longer the war lasts, the more money is spent, the more frequently debt is incurred, the higher the debt interest rates, and the narrower the fiscal space becomes.

With debt exploding and war continuing to escalate, the U.S. economy will face an extremely fragile balancing act in the coming months, with the risks of recession and inflation accumulating. The Trump administration's economic predicament is unlikely to find an easy solution.

The weekly chart of the US dollar index shows that the index has broken through the long-term upward channel multiple times and is currently barely holding on to the lower rail of the channel.


(US Dollar Index Weekly Chart, Source: FX678)

At 19:41 Beijing time, the US dollar index is currently at 98.96.