Now add the geopolitical layer. There is now a fear that economic warfare may begin between the US and Europe. When governments start threatening tariffs, economic retaliation, and territorial disputes, capital flees. Europe is sitting on a mountain of US debt. If just a tiny fraction of that begins to flee, the impact could become a contagion. That’s when yields rise, liquidity becomes strained, and the government has to roll debt at higher rates.

Foreign investors hold roughly 20–25% of all outstanding US Treasury debt, which translates into about $8–$9 trillion. European investors are the largest regional block of foreign holders of U.S. long-term Treasuries. Eurozone investors alone account for roughly one-fifth of total foreign long-term Treasury holdings. So when tensions rise through NATO disputes, capital begins to reassess what “risk-free” means.

If you look at Europe’s NATO countries collectively, we’re talking about several trillion dollars in US Treasuries and other dollar assets. Estimates in the financial press place European NATO holdings around $2.8 trillion in Treasuries alone.

https://www.armstrongeconomics.com/world-news/sovereign-debt-crisis/danish-pension-fund-disinvests-100-m-in-us-treasuries/