Sanctify ... - Regard Yahweh as holy; that is, worship and honor him with pious fear and reverence. Regard him as the source of safety, and the true defense. Ahaz and his people sought for aid from Assyria against the armies of Syria and Samaria. The direction here is rather to seek aid from God.
Let him be your fear - Do not be alarmed at what man can do Isaiah 8:12, but fear and honor God. Be afraid to provoke his wrath by looking to other sources of help when his aid only should be sought.