{"id":278645,"date":"2026-09-05T00:51:20","date_gmt":"2026-09-05T00:51:20","guid":{"rendered":"https:\/\/www.europesays.com\/iran\/278645\/"},"modified":"2026-09-05T00:51:20","modified_gmt":"2026-09-05T00:51:20","slug":"trump-wanted-to-blow-up-iran-he-may-have-detonated-the-bond-market-instead","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/iran\/278645\/","title":{"rendered":"Trump wanted to blow up Iran. He may have detonated the bond market instead"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

U.S. President Donald Trump speaks before signing executive orders in the Oval Office, on Friday.KENT NISHIMURA\/AFP\/Getty Images<\/p>\n

John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.<\/p>\n

Donald Trump<\/a> said he\u2019d blow up Kharg Island. He may have blown up the bond market<\/a> instead.<\/p>\n

The market has been a tinderbox for months, if not years. Government debt has been rising for decades but blasted off after the 2008 financial crisis, then reached hyper-speed during the pandemic. In consequence, the total global stock of government debt has risen fivefold since the turn of the millennium, with Western governments and China accounting for most of the increase.<\/p>\n

Ideally, governments should run deficits in bad economic times as they pump money into the economy to revive it, and then withdraw it in good times as economic growth swells their coffers with tax revenues. But in the past few years, this rule has broken down, and governments have run deficits even when economies are growing.<\/p>\n

In part, this has been driven by the growing demand on the public purse of pensions and health care for aging societies, the need to adapt to climate change through such measures as infrastructure upgrading and wildfire preparation, and the rapid escalation of defence expenditure amid a more turbulent world. <\/p>\n

But it\u2019s also been driven by political choices, most notably in the United States, where neither Democrats nor Republicans show any interest in reducing deficits. The result is that over just the past decade, the total stock of American federal debt has doubled to more than US$40-trillion.<\/p>\n

As a result, global investors are being asked to buy ever more bonds by governments that show no desire to reduce their borrowing habits. Further kindling has been added through recent moves by AI \u2018hyperscalers,\u2019 which have burned through their cash reserves and so have started borrowing to fund their massive data-centre buildouts. <\/p>\n

Thus, with the demand for global credit outstripping the supply, investors are in a position to demand better returns on their loans. With the pressure on interest rates consequently rising, all that is needed to ignite a credit fire would be a resurgence in inflation.<\/p>\n

Konrad Yakabuski: Global bond sell-off puts governments on notice over their runaway spending<\/a><\/p>\n

Enter Donald Trump. His war on Iran<\/a> is starting to resemble one of those dark thrillers, when a supposedly carefree engagement enmeshes the main character in a toxic and destructive relationship from which there\u2019s no escape. Now, Mr. Trump is desperate to leave Iran; but Iran has locked him in and refuses to give him the key.<\/p>\n

On the face of it, the TACO trade \u2013 Trump Always Chickens Out \u2013 still operates: each time the President escalates U.S. actions, oil prices<\/a> surge, and he backs down. <\/p>\n

His problem is, the Iranians don\u2019t reciprocate. The regime appears to have concluded that negotiating with the U.S. is pointless, since Mr. Trump will break his word, and so it\u2019s trying to establish facts on the ground to which Washington will have no choice but to accede.<\/p>\n

Specifically, Tehran is determined to control the Strait of Hormuz, where it has shown it can bring tanker traffic to a virtual standstill with the occasional drone strike. The U.S. has had some success escorting tankers out of the Strait, but the supply of oil from the region still falls short of global demand, causing prices to steadily rise.<\/p>\n

This, in turn, is putting upward pressure on inflation. It\u2019s not only gasoline prices that are rising but crucially, distillates such as diesel, which are critical to the transportation and farming sectors. Farmers have already seen costs increase because of the shortage of fertilizers (since so much of the world\u2019s fertilizer supply is produced in the Gulf). <\/p>\n

If the standoff continues without resolution, therefore, the risk is that inflation, already above target in most Western countries, will resume rising this autumn.<\/p>\n

Rather than wait for the bad news to come, bond investors are starting to demand a higher rate of interest now, to compensate for the loss of their dollars\u2019 buying power over time. <\/p>\n

Explainer: What to know about the sell-off in world bond markets<\/a><\/p>\n

If next week\u2019s inflation report comes in soft, bonds may get a breather. Nevertheless, for as long as the war continues, the paths of inflation and interest rates both look more likely to head uphill rather than down.<\/p>\n

The President still believes that the U.S. can inflict so much pain on Iran that the Islamic Republic will eventually capitulate. But the U.S.\u2019s relentless bombing has so far had no discernible impact on the regime, other than perhaps to harden its resolve. <\/p>\n

Although Iran has been devastated and its economy is in ruins, there is still little sign of the regime being anywhere near collapse. As a result, Mr. Trump is trapped between the Scylla of an inflation spike that could cause a recession and the Charybdis of a failure that would expose him to ridicule.<\/p>\n

The world economy really needs this war to end. However, since Mr. Trump fears few things more than to be called a loser, don\u2019t expect that to happen any time soon.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: U.S. President Donald Trump speaks before signing executive orders in the Oval Office,…\n","protected":false},"author":2,"featured_media":278646,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[3],"tags":[34,31432],"class_list":["post-278645","post","type-post","status-publish","format-standard","has-post-thumbnail","category-iran","tag-iran","tag-pleasemod"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/117215696147635794","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/278645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=278645"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/278645\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/278646"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=278645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=278645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=278645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}