Iran war cost hits $38 billion for US, CBO warns of further rise

The nonpartisan congressional agency estimated that the conflict had cost the Pentagon approximately $38 billion as of August 1.

The figure covers operational, logistical and sustainment expenses, including the replacement of weapons and equipment lost in combat, increased flying hours and higher fuel costs.

The CBO also warned that the financial impact could continue to grow depending on the intensity of the fighting.

If the conflict remains at the lower level of violence seen in May and June, another month could cost about $2 billion, and if combat returns to the intensity recorded in July, monthly costs could reach $3 billion or more.

Inflation pressure from war

The economic consequences are extending beyond direct military expenditure.

The CBO said disruptions caused by the conflict could push US inflation 0.5 percentage points higher during the first three months of 2027.

The agency has also assessed the effects of increased energy prices resulting from disruptions to oil and gas supplies and transport.

The Strait of Hormuz has emerged as a major factor in the economic fallout.

The narrow waterway is a crucial route for global energy shipments, and attacks and disruptions around the strait have contributed to higher energy prices.

The conflict has therefore added pressure to an already substantial US fiscal burden, while higher energy costs risk feeding into prices paid by households and businesses.

Munitions stocks under strain

A significant share of the Pentagon’s war-related expenditure has come from replacing munitions and equipment used during combat.

The CBO said the rapid expenditure of weapons had implications for US military readiness, particularly because some critical munitions can take years to replenish.

The agency's assessment said the Pentagon could face a lengthy process to rebuild depleted stocks.

The issue is particularly significant for missile interceptors and other precision weapons that could be required in a future major conflict.

The CBO said its assessment could not rely on direct information from the Department of Defence because the Pentagon did not respond to its requests.

Instead, the agency used government databases and publicly available information, meaning its estimates carry considerable uncertainty.

Pentagon disputes shortage claims

The Trump administration has disputed assessments that the conflict has left the US military without sufficient weapons.

White House spokeswoman Anna Kelly described President Donald Trump’s military action against Iran as “decisive action” intended to prevent Tehran from harming US personnel or interests.

She said the US military had “more than enough munitions, ammo, and stockpiles to serve all of the Commander-in-Chief’s strategic goals and beyond”.

Chief Pentagon spokesperson Sean Parnell also rejected reports of serious ammunition shortages.

“We have everything required to strike at the time and place of the president’s choosing,” Parnell said.

The CBO, however, said its assessment was based on available government data and public reporting after the Department of Defence did not provide the requested information.

Emergency funding sought

The growing cost of the conflict has also prompted the administration to seek additional congressional funding.

The CBO said the administration requested $87.6 billion in supplemental appropriations in June, including $67.1 billion for the Department of Defence to cover costs associated with the conflict.

The additional funding request came as US officials assessed the impact of the conflict on military inventories and operational requirements.

At a Senate hearing in July, Defence Secretary Pete Hegseth had also called for substantial emergency funding to replenish weapons stocks.

The cost estimate through August 1 is broadly in line with the figure Hegseth previously cited publicly, although the CBO's assessment provides a broader accounting of the Pentagon's operational and replacement costs.

Military readiness concerns

The CBO assessment has raised questions about the wider effect of the Iran conflict on US defence readiness.

The agency said shortages of critical munitions, including missile interceptors, could affect the Pentagon’s ability to respond if the United States became involved in another major conflict.

The assessment is particularly relevant to potential future military contingencies involving China and Taiwan, where the US could require large quantities of precision weapons and defensive interceptors.

The Pentagon's ability to replenish weapons stocks therefore remains an important component of the broader financial and military consequences of the Iran conflict.

The CBO said the initial intense phase of the conflict lasted slightly more than a month, while lower-intensity combat operations have continued.

The cost could rise substantially if the intensity increases again.

Damage to US military facilities

The war has also resulted in damage to American military infrastructure and equipment across the Middle East.

A Pentagon inspector general assessment cited in the latest reporting found damage to hundreds of buildings at US bases in the region, along with military aircraft and other equipment.

The CBO's $38 billion figure does not capture every potential cost associated with the conflict.

It excludes certain expenses incurred by other federal agencies and some costs that had already been incorporated into existing military budgets.

It also does not include future borrowing costs associated with financing the war, which could add substantially to the eventual financial burden.

Strait of Hormuz adds energy shock

The economic impact of the conflict has been amplified by disruption around the Strait of Hormuz, through which a significant share of the world's oil supply normally passes.

Higher energy prices have added to inflationary pressures in the US and other economies.

Reuters has reported that oil prices have risen sharply during the conflict, with the disruption creating additional pressure on consumers and businesses.

The CBO's analysis separates the direct cost of military operations from the wider economic consequences of the conflict.

It noted that its estimates for different categories of costs use different methodologies and time periods and therefore should not simply be added together.

War adds to fiscal pressure

The cost of the Iran conflict comes as the United States faces a substantial federal deficit.

The CBO estimated that the federal budget deficit reached $2 trillion during the first 11 months of fiscal year 2026.

Additional military expenditure comes against a backdrop of significant existing federal spending and borrowing requirements.

The CBO's latest assessment puts the direct Department of Defence cost of the Iran conflict at about $38 billion through August 1, while warning that continued fighting could add billions more each month depending on the intensity of operations.