Analysts warns of turmoil if US defaults on debt

Analysts fear the political deadlock in Washington could risk the US defaulting on its debt for the first time, sending prices soaring and global stock markets into turmoil.

Congress has until 17 October to agree on an increase to the $16.7 trillion borrowing cap, but Republicans and Democrats appear no closer to a resolution.

Traders working at the New York Stock Exchange the last time the US came close to a default in August 2011 Credit: REUTERS/Brendan McDermid

The last time the US came close to a default in 2011, stocks in America's largest companies fell some 17 points and one credit rating agency removed the country's top-tier rating.

The episode cost the US Treasury $1.3 billion (£803 million) in higher interest costs that year, according to a government study.