American taxpayers could be on the hook for billions of dollars in extra interest payments on the back of Donald Trump’s Iran war if US Treasury yields remain elevated, as investors’ fears over rising inflation add to the government’s debt burden.
Government borrowing costs at some maturities have reached their highest levels since 2007 in the 12th week of the US-Israeli conflict against Iran, as investors have sold off state debt in anticipation of higher inflation.
The yield for the benchmark 10-year US Treasury stands at 4.58 per cent, up from 4 per cent before the start of the war, and 0.45 percentage points higher than the 4.13 per cent baseline set by the Congressional Budget Office, the federal fiscal watchdog, for this year in February 2026. The 10-year is at its highest since January 2025, while the 30-year Treasury reached its highest level since July 2007.