CBO Report Reveals Iran War Cost $38 Billion and Drives Up Inflation
- The military conflict between the United States and Iran has cost the U.S.
- The vast majority of the direct spending—totaling $21.7 billion—has gone toward replacing rapidly depleted munitions, according to the CBO.
- Beyond direct military expenditures, the CBO projects that the conflict will add roughly 0.5 percentage points to inflation in the personal consumption expenditures price index during the first...
The military conflict between the United States and Iran has cost the U.S. government approximately $38 billion through August 1, 2026, according to a nonpartisan analysis released by the Congressional Budget Office.
Munitions Replenishment and Direct Costs
The vast majority of the direct spending—totaling $21.7 billion—has gone toward replacing rapidly depleted munitions, according to the CBO. That figure includes $13.1 billion dedicated to missile defense interceptors and $7.3 billion for land-attack cruise missiles. Additional expenditures cover equipment repairs and replacements, higher fuel costs, and increased flight hours for military transport and air operations. The CBO estimate aligns closely with public accounting provided by Defense Secretary Pete Hegseth, who told Congress in July 2026 that the war had cost $37.5 billion. However, a separate report issued by the Defense Department’s inspector general placed the direct conflict cost between February 28 and June 30 at $33.4 billion, noting that Operation Epic Fury has involved $22.3 billion in munitions spending and approximately $3.7 billion in lost aircraft and equipment. According to the inspector general’s findings, military losses include four destroyed F-15 fighter jets, seven KC-135 tanker aircraft, a dozen additional damaged or destroyed refueling planes, and up to 30 MQ-9 Reaper drones. Furthermore, repairing physical damage from Iranian strikes on U.S. diplomatic facilities in Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates cost an estimated $184 million, according to the inspector general.
Economic Impacts and Rising Inflation
Beyond direct military expenditures, the CBO projects that the conflict will add roughly 0.5 percentage points to inflation in the personal consumption expenditures price index during the first quarter of 2027. This upward pressure stems primarily from surging energy prices driven by supply disruptions in the Strait of Hormuz and the Red Sea. Energy costs for consumers have climbed steadily as shipping routes face ongoing security threats. The national average price of regular gasoline reached $4.33 a gallon, rising from $4.01 a month earlier, while diesel surpassed $6 a gallon, according to government tracking data. Annual inflation reached 3.4% in August, up from 2.4% in February, according to official figures. President Donald Trump has urged the public to accept higher living costs as a necessary sacrifice to prevent Iran from acquiring a nuclear weapon. While Trump initially described the military action in March as a short-term excursion that would end soon, he stated at a Republican convention in Dallas that the conflict would conclude immediately after the midterm elections.
Congressional Response and Long-Term Fiscal Outlook
The CBO’s fiscal assessment provides lawmakers with an independent benchmark as the administration seeks additional funding for the military campaign. Congressional Democrats have seized upon the CBO figures to criticize the administration’s budget priorities as the national debt surpasses $40 trillion.
Rep. Brendan Boyle The CBO cautions that its figures are subject to considerable uncertainty because the Defense Department did not respond to the agency’s requests for information, forcing analysts to rely on public databases and reports. Additionally, the estimate does not include debt service costs or borrowing expenses, meaning the ultimate price tag for taxpayers will depend on future decisions regarding troop deployments, base repairs, and the timeline for rebuilding strategic weapons stockpiles.