This refers to the terrifying rumours which were being spread in Al-Madinah. On the occasion of his return from Uhd, Abu Sufyan had challenged the Muslims to a fight the following year at Badr. But when the time approached, he could not find courage on account of the famine that was raging in Makkah. So in order to save face, he tried to shift on to the Muslims the responsibility for the postponement. Accordingly, he sent a special spy to Al-Madinah to terrify them by spreading rumours that the Quraish were making great preparations for war and collecting such a large army as could defeat any army in Arabia. This device of Abu Sufyan succeeded in producing the desired panic. When the Holy Prophet made an appeal to the Muslims to meet the Quraish in combat at Badr, it failed to produce any encouraging response. So much so that the Messenger of Allah had to declare before the gathered assembly, "I will go to the combat all alone, if none else is willing to go." It was then that 1,500 devotees volunteered to accompany him, and he reached Badr with them. From the other side,Abu Sufyan left Makkah with an army of 2,000 men. But after two days' journey, he told his men that it did not appear to suit them to have a fight that year, and that they would come next year for it. Accordingly, he returned to Makkah with his men. The Holy Prophet, however, waited for him at Badr for eight days. During these days, his Companions did profitable business with a trading party. Then he came to know that the disbelievers had gone back to Makkah, and he returned to Al Madinah.
Tafsir Ibn-Kathir:
(It is only Shaytan that suggests to you the fear of his friends,) meaning, Shaytan threatens you with his friends and tries to pretend they are powerful and fearsome.
Allah said next, (so fear them not, but fear Me, if you are indeed believers.) meaning, "If Shaytan brings these thoughts to you, then depend on Me and seek refuge with Me. Indeed, I shall suffice you and make you prevail over them.''
Similarly, Allah said,
(Is not Allah Sufficient for His servant Yet they try to frighten you with those besides Him!) [39: 36], until, (Say: "Sufficient for me is Allah; in Him those who trust must put their trust.'') [39:38].
(So fight you against the friends of Shaytan; ever feeble indeed is the plot of Shaytan.) ﴿4:76﴾ and (They are the party of Shaytan. Verily, it is the party of Shaytan that will be the losers!) [58:19],
(Allah has decreed:
"Verily, it is I and My Messengers who shall be the victorious.'' Verily, Allah is All-Powerful, All-Mighty.) [58:21] and
(Verily, Allah will help those who help His (cause).) [22:40] and
(O you who believe! If you help (in the cause of) Allah, He will help you) [47:7], and,
(Verily, We will indeed make victorious Our Messengers and those who believe, in this world's life and on the Day when the witnesses will stand forth. The Day when their excuses will be of no profit to wrongdoers. Theirs will be the curse, and theirs will be the evil abode.) [40:51,52]
Qur'an Wiki: Finally, the passage concludes with explaining the reason behind fear. It is Satan who tries to depict his allies as a source of might. The believers must be on their guard never to entertain any fear of Satan or his allies. They must fear God alone, the Almighty Who overpowers all forces: “It is but Satan who prompts people to fear his allies: so, have no fear of them, but fear Me if you are truly believers.”
It serves Satan’s purpose to show his allies as powerful and mighty, able to inflict harm on, and cause benefit to others. By doing so, he has the chance to spread evil and corruption on earth. People will surrender to his allies and allow them to do whatever they want. No one will contemplate standing up to them or foiling their evil purpose. When evil appears to be too powerful and people are paralysed by fear, then Satan’s allies can accomplish what he wants of them. Thus, right appears to be wrong and wrong is shown to be right. Evil and corruption become widespread while truth and justice are suppressed. The evildoers make deities of themselves to perpetuate the suppression of goodness and to protect evil. When no one is able to stand up to them, evil becomes triumphant while the truth is overshadowed and forgotten. Satan is a deceptive sorcerer who hides behind his allies while at the same time causing people to fear his allies. But God exposes him as he truly is, without cover. The believers are made aware of Satan’s scheming. Thus, they can be on their guard and they have no fear of him or his allies.
Both Satan and his allies are too weak to be feared by any believer who relies on his Lord and has His support. The only power to be feared is the one which truly can cause harm and benefit. That is God’s power, feared by those who believe in God. By fearing God alone they are the most powerful of all people. No other force can stand up to them. Hence, God instructs the believers in these words: “It is but Satan who prompts people to fear his allies: so, have no fear of them, but fear Me if you are truly believers.”