Analysts say Europe's biggest weapon against Washington may not be trade retaliation, but its vast ownership of US financial assets.

Deutsche Bank's chief FX strategist George Saravelos has warned that America's greatest vulnerability lies in its dependence on foreign creditors to finance large external deficits, while Europe has quietly become Washington's biggest lender.

"Europe owns Greenland, it also owns a lot of Treasuries," Saravelos said in a weekend note. He added that European countries hold about $8 trillion in US bonds and equities, almost twice as much as the rest of the world combined, giving the continent unprecedented financial leverage.

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With geopolitical tensions rising, Saravelos said European investors may rethink their heavy dollar exposure. Danish pension funds have already begun repatriating funds and cutting US dollar holdings, a trend that could spread as political uncertainty deepens.

The key trigger ahead, analysts say, is whether the European Union activates its anti-coercion instrument, a legal mechanism designed to respond to economic pressure from foreign powers, potentially extending countermeasures into capital markets.

"It is a weaponisation of capital rather than trade flows that would by far be the most disruptive to markets," Saravelos said.

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However, market commentators caution that deploying this financial "bazooka" is easier said than done. Most US assets owned by Europe sit not with governments but with private pension funds, insurers, and institutional investors, limiting the ability of EU authorities to compel large-scale sales. That reality makes Europe's financial leverage powerful in theory, but difficult to fire in practice.

Still, with America's net international investment position at record negative extremes and mutual dependence between US and European capital markets at historic highs, the threat alone may be enough to unsettle Washington.

Donald Trump no longer needs to think "purely of peace" after being snubbed for a Nobel, the US president said in comments published Monday, adding the world will not be safe until Washington controls Greenland.

Trump has put the transatlantic alliance to the test with threats to take over Greenland "one way or the other", with European countries closing ranks against Washington's designs on the vast Danish territory.

German and French leaders denounced as "blackmail" weekend threats by Trump to wield new tariffs against countries which oppose his plans for the Arctic island, and said Monday that Europe was preparing trade countermeasures.

The European Union said it was holding an emergency summit on Thursday to weigh its response, and that while its priority is to "engage, not escalate," it is ready to act if needed.

Greenland, for its part, said the tariff threat does not change its desire to assert its own sovereignty.

"We will not be pressured," Greenlandic prime minister Jens-Frederik Nielsen said in a Facebook post, adding that the autonomous territory "is a democratic society with the right to make its own decisions".

But Trump had earlier doubled down, announcing in a message to Norway's Prime Minister Jonas Gahr Store that the world "is not secure unless we have Complete and Total Control of Greenland".