The world has never faced a crisis while loaded with so much debt, making the U.S. especially vulnerable despite being the world’s biggest oil producer, according to Ruchir Sharma, chair of Rockefeller International, the global investment strategy arm of Rockefeller Capital Management.

In a Financial Times op-ed on Sunday, he warned that this lack of fiscal breathing room leaves indebted governments with little ammunition to fight the energy shock caused by President Donald Trump’s war on Iran.

History shows similar crises have blown up budgets. Oil shocks during the 1970s represented a turning point where governments started running deficits constantly instead of just occasionally, Sharma pointed out.

As a result, the average government debt level for G7 countries has soared to more than 100% of GDP from only 20%. And total global debt rose last year at the fastest pace since the pandemic, hitting a record $348 trillion, or more than three times global GDP.

With one-fifth of the world’s oil and liquefied natural gas bottled up in the Persian Gulf, governments are scrambling to roll out price controls, rationing programs, and subsidies. But many governments don’t have the fiscal resources, and bond investors are ready to punish any attempts to spend too much.

“Longer-term inflation expectations remain stable, but markets fear the Iran oil shock will trigger more spending on top of rapidly expanding deficits and debt, which is resulting in a higher-term premium for bonds,” Sharma wrote.

This is already playing out in the U.S., where weak demand for recent Treasury bond auctions forced yields to go higher than expected, highlighting concerns among investors about the Iran war’s impact on the deficit and debt.

Meanwhile, central banks are similarly hamstrung as they struggle to reduce inflation. The Federal Reserve has failed to bring U.S. inflation back down to its 2% target for five years, weighing on prospects for rate cuts to counteract an economic slowdown from the oil shock.

“The most vulnerable nations are those with the highest government debt and deficits, and with a central bank missing its inflation target; in the developed world they include most prominently the U.S. and the U.K.; in the emerging world, the most at risk are led by Brazil, Egypt, and Indonesia,” Sharma said.

And despite being the world’s biggest oil producer, the U.S. won’t be immune to a prolonged war, given that its nearly 6% annual budget deficit was the highest in the developed world last year, he added.

Trump’s plans to boost yearly defense spending by 50% to $1.5 trillion threaten to make the U.S. debt outlook even worse as interest payments on all its borrowing already exceed $1 trillion a year. Combined with recent tax cuts, the deficit could reach 7% of GDP this year, Sharma estimated.

Trump has said he expects the Iran war to last four to six weeks. It has now entered its sixth week, and there are few signs of a quick end to the conflict.

In fact, evidence points to more escalation and a longer war. Thousands of troops are headed for the region; a third aircraft carrier is en route; and the Pentagon is committing nearly its entire inventory of stealthy JASSM-ER cruise missiles to the Mideast.

None of that will be cheap. The Defense Department is reportedly seeking $200 billion from Congress for the war, after the military depleted much of its most expensive munitions, while Iranian attacks have damaged or destroyed U.S. aircraft, radar systems, and bases.

“The need for additional spending to finance the war would increase U.S. debt, sparking a bond market selloff as investors require additional compensation to cover potential losses,” RSM chief economist Joseph Brusuelas said in a note late last month. “Long-term rates such as 30-year mortgage rates are based in part on the benchmark U.S. 10-year yield. Most important: The bond market remains undefeated.”