Conflagration
Week of February 27-March 5, 2026
Welcome to TRACKING THE CRISIS, a weekly round-up from The Democracy Collaborative tracking the administrative, legislative, and other actions of the Trump Administration as well as the many forms of legal and movement response from across a broad range of social, political, and economic actors. TDC is providing this service for collective informational purposes, as a tool for understanding the times during a period of disorientingly rapid flux and change in the U.S. political economy. This round-up is produced by humans, not by Artificial Intelligence. TDC should not be understood as endorsing or otherwise any of the specific content of the information round-up.
TRUMP TRACKER: Administration actions
Over 1,300 killed in first week of Middle East regional war as Israel expands the war to Lebanon and Hezbollah; Iranian president vows to back off regional attacks as more countries dragged into conflict. Seven days into the U.S./Israeli war on Iran, the conflagration is taking on a global dimension as countries point fingers, international order is ignored, and more than a dozen countries are being directly pulled into the conflict. The Israeli Defense Forces (IDF) sent a ‘broad-scale wave of strikes’ early Saturday, March 7, launching more than 400 attacks across Tehran and the western regions of Iran to cripple its missile-launching capability after U.S. officials publicly speculated that Russia may have given Iran intelligence on U.S. positions in the Gulf. The new strikes come days after the IDF launched intensive air strikes on and ground incursions into southern Lebanon, forcing over 300,000 people to flee from their homes after Hezbollah fired rockets at Israel Tuesday in retaliation for killing Ayatollah Khamenei. On the same day, Cyprus reported that three Iranian Shahed missiles were fired in the direction of a British air base; Keir Starmer, who was prevented by his own cabinet from lending Trump the use of UK air bases for the attack, dispatched a destroyer to the region on Wednesday, along with France, Greece, and Germany, which sent naval assets to Cyprus. On Wednesday, March 4, NATO intercepted an Iranian missile heading into Turkey’s airspace, marking the first NATO engagement in the conflict.
That same day, a U.S. submarine sank an Iranian warship off the coast of Sri Lanka as it returned from an international exercise in the Indian Ocean, killing 87 sailors and causing embarrassment for India, who had hosted the exercise and whose military paraded with Iranian sailors from the ship in front of President Modi just days before. The U.S. Navy had also been scheduled to participate in the exercise and should therefore have known that the Iranian ship was effectively unarmed at the time of the strike. On Thursday, Azerbaijan reported that Iranian drones had crossed its border and injured four people in the Nakhchivan autonomous enclave, condemning the strike as an ‘act of terror’ and closing its airspace and border with Iran, saying it was readying a response. On Friday, as Gulf States reportedly began running low on interceptors, Ukraine said it was in talks with the U.S. and Gulf states to supply them with anti-drone technology developed in its ongoing war with Russia. As of Thursday, Pete Hegseth and CENTCOM announced at a joint press conference that the U.S. and Israel were now in the second phase of their campaign, which Israeli officials said aims to strike at “the foundations of [Iran’s] regime”; Hegseth said “the amount of firepower over Tehran and Iran is about to surge dramatically.” Trump followed up with comments Friday demanding Iran’s “unconditional surrender,” suggesting that he could pick a “GREAT and ACCEPTABLE” leader with whom he would work to “Make Iran Great Again.”
Iranian President Pezhezhian appeared on state television early Saturday to apologize to neighboring countries for launching attacks, explaining that after the U.S. and Israel had taken out a large portion of the military’s senior leadership, the Revolutionary Guard, who had answered only to Khamenei, “took the necessary actions independently in the absence of their commanders and defended our land with honor and strength.” He said that the Interim Council had reached a decision that they “should not attack neighboring countries… unless we are attacked by them.” Just minutes after the announcement aired live on Al Jazeera, alerts rang out on phones in the studio in Doha as another incoming missile was intercepted. Though he said he would rather resolve things through diplomacy, Pezhezhian called for national unity in the face of the assaults and responded directly to Trump’s demand, saying that “the idea of Iran’s unconditional surrender is a dream that our enemies must take to their graves.” He also articulated a particular warning for other countries as well as internal groups – such as the Kurds, whom Trump had called earlier this week to ask for their help in dismantling the regime: “I hope that countries where certain groups or factions are seeking to exploit this opportunity to attack Iranian territory will understand that it is better not to become tools of imperialism.” The IRGC released a statement affirming the decision of the interim Council, while also saying that resulting from previous actions, “all military bases and interests belonging to the United States and the “Zionist regime” on land, at sea, and in space across the region will be considered primary targets” for the armed forces.
Over 1,200 Iranians have been killed in the first seven days of the war, along with 11 Israelis, at least six U.S. troops and several people from other countries as the war expands. International human rights agencies estimate at least 770 civilians have been killed in Iran, including 175 schoolchildren and staff that were killed in a missile strike on their school on day one of the war. Thousands of people gathered in Minab on Tuesday to hold a mass funeral for the victims, as parents held up printed pictures of their children as a “document of American crimes.” The crowd reportedly erupted into chants against the United States and Israel, along with “No Surrender.” Foreign Minister Araghchi posted a picture of graves on social media with the caption: “This is how ‘rescue’ promised by Mr Trump looks in reality. From Gaza to Minab, innocents murdered in cold blood.” Other officials said that the United States and Israel continue to “indiscriminately strike residential areas, sparing neither schools, hospitals, or cultural monuments.” The World Health Organization has confirmed at least 13 attacks on health care infrastructure in Iran, and is working to verify initial estimates of four health workers dead and 25 injured. First responders in Minab have told Middle East Eye that the school had been hit twice in what was apparently a “double-tap” attack, as the second strike appeared to target sheltering survivors. When asked by reporters, Pete Hegseth said that the U.S. military was ‘investigating’ the incident, while Marco Rubio said that the United States “would not deliberately target a school.” An independent investigation by CNN, using updated satellite imagery, showed that the United States was most likely responsible for the bombing; a finding corroborated by U.S. military investigators a day later, though denied by Trump without offering evidence. War Powers resolutions were voted on by Congress this week, but fell short of reclaiming the authority to compel Trump to stop the war; the Senate vote failed to advance 53-47, and the House vote narrowly failed 219-212 after five Democrats crossed the aisle to vote with Republicans to allow Trump to continue the war.
February jobs report reveals disaster in labor market with 92,000 jobs lost; affordability crisis deepens, affecting a greater share of the middle class and posing bigger political problems for Trump. On Friday, March 6, the Bureau of Labor Statistics released their jobs report for the month of February showing a dismal picture of the labor market as war, investment uncertainty, AI replacement concerns, and affordability issues have converged to squeeze more of the middle class and further weaken a fragile economy. The report showed that the labor market lost 92,000 jobs in February, which came as a huge shock to mainstream economists who had expected – on the apparent ‘strength’ of the January numbers – a 60,000 increase in jobs; unemployment also ticked back up to 4.4%. Even healthcare, the one sector that has carried the lion’s share of job growth through 2025 due to an aging population and other needs for healthcare workers, could not save the labor market at large this month as it also lost jobs in February. The news set off major alarms on the state of the economy across Wall Street, which along with concerns about the historic spike in oil prices and supply chain disruptions amidst the Iran war led to steep drops in valuation across multiple sectors this week. AI was blamed for the job cuts, especially in the tech industry, because of high-profile layoffs like Jack Dorsey’s Block, who laid off nearly half its staff this week; though some companies, like one robot-based delivery service in Los Angeles, have hired their employees back at lower wages to help ‘manage’ the robots on their delivery runs. Economic growth has also been dismal, as a Commerce Department report released last week showed that GDP growth slowed to just 1.4% in the last quarter of 2025. In the same period, inflation has continued to grow at around 3%, revealing an economy under increasing strain. This has led some economists to say that the ‘K shaped economy’ may be turning into an ‘E shaped economy’ as a greater share of the mid-to-higher-income consumer base for sectors like real estate and luxury goods, which had been holding up a staggering economy, begins to fall behind.
These stagflation dynamics have only deepened and broadened the conversation around the ‘affordability’ crisis, which has surged to become the most prominent political issue for the vast majority of voters. A new Washington Post/ABC News/Ipsos poll released over the weekend showed that while most ‘middle-class’ workers in the United States can afford daily basic necessities like food and gas, big-ticket essentials, such as a home, a car, or healthcare, are increasingly seen as out of reach, including for those earning six-figure incomes. The Urban Institute’s Affordability Tracker indicates that more than half of American families cannot afford the true cost of living in their communities. Washington Post notes that according to Google Trends, searches for the word “affordability” spiked in November 2025, during elections in which Republicans lost long-held districts on affordability issues such as utility prices where, on average, price hikes were nearly double what they were in 2024. Impacts of Trump policies such as tariffs and supply chain issues are causing affordability issues for companies, which are pulling back on hiring or suppressing wages in order to maintain profit margins. A new report from the Institute for Policy Studies highlights the outsized role that some very large corporations – whom they call the “Low-Wage 20” – play in deepening the affordability crisis, showing how the average real wage had actually declined from 2019 to 2025.
The report could not have come at a more challenging time for Trump and Republicans who still believe in “America First” and/or buy into the “golden age” Trump has touted in his rhetoric, notably in last week’s State of the Union address, regarding the economy. The Wall Street Journal notes that Trump issued his demand for Iran’s ‘unconditional surrender’ just 20 minutes after the jobs report went public; not that it gave much of a distraction, since the weakness and fragility of the economy have only been exacerbated by the war-induced oil shock, which risks turning the affordability crisis into a calamity. Recent polling shows Trump is hemorrhaging support, especially among Black and Latino voters; support from Latinx voters has fallen over 20% since the 2024 election, and his support among Black voters, whose unemployment rate rose to a post-pandemic high of 7.7% in the jobs report, stands today at just 10%. As communities across the country brace for the impact of skyrocketing gas prices, various efforts are being made at state and local levels to try to keep communities afloat through an economic downturn. The Senate advanced a ‘comprehensive’ bipartisan housing reform bill this week, aimed at alleviating home affordability through a server-supply bill mainly focused on tax breaks and deregulation to ‘incentivize’ builders to accelerate increasing the housing stock. It also includes Trump’s desired ban on ‘large investor’ ownership of homes.
Goldman Sachs CEO warns Wall Street ‘smells like 2008’ as escalating defaults, investor ‘runs’ on private credit, and panic buying of oil increase risk of financial meltdown. On Thursday, March 5, the escalation of U.S. and Israeli strikes on Iran were met by moves by the Revolutionary Guard to effectively close the strait of Hormuz, cutting off the main route for one-fifth of the global oil market and triggering a record-breaking wave of panic buying that pushed the price of oil over $90, its highest price since 2023 and the biggest one-week oil price spike on record. The Dow plunged over 1,000 points on the price surge and threats of inflation, as well as the dismal February jobs report. An escalating ‘investor run’ on the private credit market also helped send stocks cratering this week as a second major private equity fund, BlackRock, halted redemptions (essentially, ‘cash-outs’) to retail investors and scrambled to meet bank obligations as a wave of business loan defaults swamps the industry. The convergence of a wartime oil shock, a severely weakened underlying real economy, and the looming threat of a 2008-scale financial meltdown in the private credit market has prompted economists and market analysts to begin ringing alarm bells of systemic risk to the U.S. and global economy.
As a result the recent market volatility, the bursting of the AI bubble, and now the oil shock from the Iran war, cracks have begun to appear and widen in the private credit market, drawing scrutiny from economists and investors who now fear that this large, mostly opaque industry could become the catalyst for the next major financial crisis. Lloyd Blankfein, the former head of Goldman Sachs at the epicenter of the 2008 financial meltdown, warned this week that the current situation “smells like 2008.” Up until recently, the private credit market had been considered a vital engine of post-2008 recovery; relatively safe – because it only represented a small, contained portion of the wider credit market, about 9% of total lending – yet lucrative sector where investors could enjoy higher yields with mild levels of risk. Since 2008, the private credit market has ballooned to over $3.8 trillion and effected an epochal shift in the business loan sphere, dominating the ‘middle-market’ (BBB-rated) lending space previously served by traditional banks. Traditional banks came to see private credit no longer as a competitor in the corporate lending game, but as a partner who could take on risks they were not allowed to assume. Banks have invested over $98 billion in special financing vehicles to private credit firms for syndication to non-traditional business clients. Retirement funds, such as 401(k)s and institutional pensions, had been protected from private credit and other risk-carrying sectors through ERISA (the Employee Retirement Income Security Act), but in August 2025, Trump signed an executive order allowing 401(k)s and institutional pension funds to invest in private credit as well as cryptocurrency markets, meaning they could henceforth be exposed to major losses from this sector.
After Trump began imposing his tariff regime on “Liberation Day” last year, injecting unprecedented uncertainty and volatility in financial markets, investors began withdrawing their money from even mild risk-carrying securities like private credit to move into traditional safe havens like gold, Swiss accounts, and Treasury bonds. As the underlying real economy began to sputter and slow down near the end of 2025, the pace of withdrawals from private credit surged as jitters and risk aversion pervaded retail investor sentiments – essentially, a kind of slow-motion ‘bank run’ on non-bank lenders. When the release of Anthropic’s new AI Legal Assistant triggered a software stock selloff and crashed markets last month, Blue Owl – the private credit firm with the largest portfolio of software company loans – was hit with a wave of withdrawal demands from retail investors, and was the first to ‘close the gates’ on retail investor redemptions. Its stock fell 30%, the company and its employees bought back $400 million in shares and was forced to sell about $1.6 billion in assets to cover its bank obligations. Blue Owl’s near-collapse rang alarm bells as market watchers began focusing on private credit as the ‘elephant in the room’ in regards to wider economic risks from the bursting of the AI bubble, since around 40% of total private credit lending is tied up with small and mid-size tech companies that would be most at risk of being disrupted or sunk by emerging AI capabilities. Since the crisis at Blue Owl became known, redemption requests have exploded at all other private credit firms; and this week, BlackRock became the second major private credit firm to shut the gates on people wanting their money back, as redemption requests reached $1.2 billion, or over 9% of its total asset value. Blackstone nearly had to do the same, facing a record 7.2% of its total asset value in redemption requests; senior officers pitched in $150 million of their own personal funds in order to prevent the panic from forcing them to liquidate assets in order to cover its obligations.
Because private credit firms are not traditional banks with public disclosure requirements under FDIC, the extent of the developing crisis within this industry, and its potential to spread contagion to the rest of the economy, is unknown. Economists have long suspected that private credit assets are ‘wildly’ overvalued and that the actual loan default rate is much higher than the official numbers obtainable by market analysts; UBS and Pimco voiced suspicions this week that it could reach as high as 15%. In May 2025 the Fed began research into whether the now-extensive links and interdependence between traditional banks and private credit could expose the wider financial system to adverse events happening within the private credit market; the Boston Fed concluded that since bank loans are secured, they would be paid off first and therefore should not suffer losses unless wider economic conditions were similarly adverse, as in a recession.
Also in the news this week.
Kristi Noem fired as Homeland Secretary after scathing Congressional hearing on ICE. Department of Homeland Security chief Kristi Noem was fired from her post this week after a contentious ‘employee review’ on Capitol Hill explored the many controversies that surrounded her tenure as Homeland Secretary. Senate Democrats grilled Noem on the brutal tactics of ICE in Minneapolis and other cities, as she avoided the question of apologizing to Alex Pretti’s family after she denied portraying him as a ‘domestic terrorist’ at a recorded, widely available press conference. She was also grilled about her relationship with top aide Corey Lewandowski, whose affair with her was an ‘open secret’ in Washington, and about conflicts of interest surrounding his role in securing a pop-up firm to whom she awarded a $220 million contract to create a DHS ad campaign starring herself. Republican Sen. Thom Tillis led one of the most fiery interrogations as he called her leadership of DHS a “disaster,” demanded her resignation and threatened to hold up Senate business until the deed was done. Ultimately, what apparently sealed her fate with Trump, who had always defended her actions and decisions, was the fact he did not sign off on her $220 million DHS campaign, and “wasn’t thrilled” with her use of the funds. She will be succeeded by Oklahoma Sen. Markwayne Mullin, a Trump devotee who once challenged Teamsters President Sean O’Brien to a fist-fight in the Senate chamber. She will be reassigned to a post at the new, cryptically named agency ‘Shield of the Americas’, which Trump unveiled Friday as a coalition of U.S. and Latin American leaders nominally formed to ‘eradicate’ drug cartels.
Trump urges divided GOP to pass the SAVE America voting bill “at the expense of everything else.” As the MAGA base becomes increasingly fractured over the Iran war, affordability, and a host of other issues, Trump doubled down on the SAVE Act, exhorting Senate Republicans to pass the bill “at the expense of everything else.” The White House confirmed Friday that the bill will receive a set of new provisions, including several targeting transgender people. The SAVE Act will make access difficult for anyone who has changed their name legally for any reason, potentially including married people and adoptees. The SAVE Act passed the House in February but has stalled in the Senate, where its alignment along party lines prevents it from reaching the filibuster-proof 60-vote threshold.
MOVEMENT TRACKER
Local resistance to AI data centers continues; the Pro-Human Declaration brings together unlikely allies. As efforts to establish AI data centers proliferate across the country, local officials often join communities in trying to stand in their way, and many times have to contend with state officials seeking economic development dollars and other benefits. The legislative tracker Multistate is keeping a record of such divisions and the governance questions they generate. Lawmakers in Oregon voted to advance a one-year moratorium on tax breaks for data centers, allowing time to study the industry’s impacts on local economies. Meanwhile, a city audit in Phoenix, Arizona revealed that data center tax breaks cost taxpayers millions, as some developers are pivoting away from data center development under public pressures. Also this week marked the debut of an unlikely coalition of interfaith leaders, unions, think tanks, and political activists spanning the political spectrum from Bernie campaigners to Steve Bannon, who came together with a common purpose: to fight for responsible and safe AI development. The initial meeting was convened in January in New Orleans by the Future of Life Institute, one of the most authoritative voices in the world of AI safety. On Wednesday, the coalition released their manifesto: the Pro-Human AI Declaration, a set of five guidelines by which they say AI can and must be developed responsibly by putting humanity first. The guidelines include: 1. Keeping Humans in Charge; 2. Avoiding Concentration of Power; 3. Protecting the Human Experience; 4. Human Agency and Liberty; and 5. Responsibility and Accountability for AI Companies.
Bipartisan resistance to ICE remains strong in communities directly affected. While NIMBYism is often associated with classist, conservative sentiments resisting change or diversity in suburban enclaves, in at least one instance those sentiments are being mobilized by progressives: resisting ICE’s expansion of its detention facility network. Even in strongly Republican cities like Roxbury, New Jersey, “not in my back yard” is a popular sentiment. The Maryland State House of Delegates passed three emergency bills Thursday limiting the construction of detention centers, setting regulations for the conditions therein, and allowing residents pathways to hold federal agents accountable for civil rights violations, as DHS moves to increase ICE activity in the state. The state of Maryland has sued DHS over a planned detention facility in Williamsport, claiming the administration did not conduct the required environmental report nor seek public input on the project. Protests outside the Whipple detention center in Minneapolis, Minnesota are ongoing, and the reports indicate that DHS is moving to close the notorious Fort Bliss detention camp near El Paso, Texas. In the wake of the deaths of Renee Good and Alex Pretti, local governments are using their powers to assert their jurisdictions and keep their community members safe. In Denver, Mayor Mike Johnston signed an executive order authorizing Denver police to intervene and physically detain any of Trump’s agents for using excessive force that could cause death or serious bodily injury. The order includes banning the use of any city property for purposes of immigration enforcement. The order’s rules are backed up by Denver’s city attorney, Miko Brown, who added that enforcement options for ICE misconduct locally included criminal charges.
Military action against Iran has sparked protest from veterans and civilians alike. Notably, Marine veteran and North Carolina senate candidate Brian McGinnis suffered a broken arm while being forcibly ejected from the U.S. Senate building as he protested outside a subcommittee hearing on military readiness. Spontaneous protests in Minneapolis, Chicago, and New York City drew large crowds; veterans and veterans’ groups have repeatedly spoken out against the possibility of another “forever war” nationwide. Polls indicate that a majority of Americans oppose military action against Iran and expect a long-term conflict to develop from such action.
