A wave of bond selling in the first days of September has pushed global financial markets into a sensitive phase. The yield on 10-year US Treasuries reached 4.78%, the yield on Japan’s 10-year government bonds rose to 3%, and Brent crude climbed above $91 a barrel. Stock markets also came under pressure. These are signs of the beginning of a crisis that could present the White House with conditions far more difficult than those it faces today. The simultaneous emergence of these developments raises a serious question: if pressure moves from the bond market to the stock market, how much of it can the US economy absorb?

US Treasuries are essentially a tool through which the government borrows from investors. The government issues bonds to finance its spending, and buyers receive interest in return. When demand for these bonds falls, their prices decline and the government has to offer higher yields to attract buyers. As a result, financing costs rise not only for the government, but also for companies and households.

The significance of recent developments stems from the fact that the US bond market is facing several pressures at the same time: the government’s heavy debt and budget deficit, the need to issue large amounts of new debt, concerns about inflation and growing uncertainty caused by the war. The recent wave of selling therefore cannot be attributed to a single factor. The war is one of the forces amplifying a trend rooted more deeply in the US fiscal and financial situation.

The Iran war enters this equation through energy. An increased risk of disruption in the Strait of Hormuz, even without a complete halt to oil exports, could raise insurance and transportation costs. Markets are already reflecting the possibility of future disruption in today’s oil prices. Higher oil prices mean more expensive fuel, costlier transportation and higher production costs, with some of those increases ultimately passed on to consumers.

This is where the war collides with US economic policy.

Higher energy prices intensify inflationary pressure and, as a result, limit the Federal Reserve’s room to cut interest rates. But higher interest rates also increase mortgage costs, corporate financing costs and the cost of government debt. Keeping interest rates unchanged does not necessarily solve the problem either, because long-term bond yields are determined by the market itself.

Put simply, the central bank may leave interest rates unchanged, but selling by investors in the bond market can still drive up the cost of money across the US economy.

This can be described as an “economic policy squeeze.” The government and the central bank must simultaneously contain inflation, support economic growth, manage the heavy cost of government debt and prevent instability in financial markets. Yet every decision can make another objective more difficult to achieve.

At this point, the US military instrument also faces a serious paradox. If Washington uses greater military force to increase pressure on Iran, it could heighten regional uncertainty and, in turn, drive up energy, insurance and transportation costs — precisely the factors that can increase inflationary pressure and financing costs. On the other hand, reducing the use of this instrument could, from Washington’s perspective, increase the costs to US deterrence and military credibility. Thus, a tool deployed to reduce the geopolitical cost of the war could simultaneously increase its economic cost. This is the very paradox that deepens the US economic policy squeeze.

Japan is also particularly important in this equation. The yield on Japan’s 10-year government bonds reached 3% on September 1, a level not seen since the 1990s. Higher Japanese bond yields can make domestic assets more attractive and reduce the incentive for Japanese investors to hold foreign assets.

This development matters to the US because Japan is one of the largest foreign holders of US Treasuries. If some Japanese capital flows back from US markets into Japan, demand for US Treasuries will decline. At a time when the US government needs to issue large amounts of new debt, weaker demand could put further upward pressure on yields.

From this perspective, efforts to support the yen’s value and provide access to dollars in exchange for pledging US Treasuries as collateral are not simply matters related to the foreign-exchange market. One possible purpose of such mechanisms is to prevent a major Treasury holder from being forced to sell large amounts of US assets to obtain dollars quickly.

Recent warnings from Ray Dalio also carry weight in this context because of his particular standing as an investor and financial expert. He has linked rising yields on long-term US Treasuries, the government’s heavy debt burden, developments in the Japanese market and US Treasury Department actions in the bond market, warning that the debt cycle is becoming more fragile. Dalio’s comments do not necessarily amount to a prediction of an imminent market collapse; rather, they draw attention to the serious risk that if debt supply outpaces natural market demand, the government’s financing costs will rise.

But the bigger concern is the possibility that pressure could spread from the bond market to the stock market.

This does not mean that every wave of bond selling will cause stocks to crash. The main transmission channel is through corporate valuations. When government bond yields rise, investors demand higher returns for taking on the risk of equities as well, meaning they may no longer be willing to pay previous prices.

At the same time, more expensive money means more expensive borrowing for companies. Some expansion plans, factory construction projects or new investments that were economically viable when rates were low may become less attractive when rates are higher. Reduced investment can weaken corporate earnings growth and ultimately put pressure on stock markets.

At a more severe stage, a simultaneous decline in the value of bonds and stocks could also put pressure on banks and financial institutions. If that pressure is accompanied by a need for liquidity, lending could decline and what began in financial markets could spread to the real economy.

But the chain reaction is not purely economic; ultimately, it becomes political.

Ahead of the November elections, the Trump administration needs an economy that continues to grow, a strong stock market and no sharp increase in household living costs. Yet higher energy prices, yields and borrowing costs would move in exactly the opposite direction.

American voters may not know how Treasury yields are calculated, but they feel the consequences in gasoline prices, mortgage payments, the cost of goods and the value of their savings and investments.

The wave of bond selling at the beginning of September cannot simply be dismissed as a normal market fluctuation. If the pressure persists and spills over into the stock market, the issue will move beyond a financial fluctuation.

The Iran war could activate a chain that begins in the Strait of Hormuz, reaches the energy market, enters the debt market through inflation and the cost of capital, and ultimately returns to Wall Street and the US economy.

A war that was supposed to leave Tehran paying the price could end up sending part of its bill back to Washington through the energy, debt and stock markets.