US Treasury Secretary Janet Yellen warned on Tuesday a United States default would result in an "unprecedented economic and financial storm" that could trigger an income shock and lead to recession, per Reuters.

Yellen further elaborated by saying that default could disrupt government operations such as air traffic control, law enforcement, national defense and telecommunications and lead to a financial markets 'break' with worldwide panic triggering margin calls, runs and fire sales.

Market reaction

Markets remain cautious on Tuesday and the Dow Jones Industrial Average was last seen losing 0.55% on a daily basis.