WASHINGTON—President Barack Obama warned Tuesday of "economic chaos" if a political stalemate causes the U.S. to no longer be able to pay its bills, and said he would accept even a short-term increase in the borrowing limit to give lawmakers time to negotiate.

Mr. Obama's comments underscored rising concern at home and abroad, including in financial markets, that the U.S. could default on its financial obligations should the standoff continue through next week. The remarks were intended to pressure Republicans to...