Abject terror? Yeah, I do remember the first time I was sunk by DC's. I was still playing GWX back then and had had no problems at all in evading the escorts. Suddenly late 1943 the escorts just picked me up time and again. I was getting damaged and had very little experience in what to do to repair the damage. After a while I realised I would not be able to escape from them. I even lost the will power to keep trying for a little while, I just left the boat going on at a steady course and didn't have any idea where the escorts were or what they were doing. I lost all situational awareness about them.
Dead is dead and low TC does add a lot to the game. SH3 is the only game I know of that can induce a sense of fear or hopelessness