The CBO says the conflict could add $2 billion to $3 billion to the US military bill each month, while higher energy prices are expected to put fresh pressure on inflation
The US military’s war with Iran has cost the Pentagon about $38 billion in its first five months, with another $2 billion to $3 billion likely to be added for every additional month of fighting, according to a new Congressional Budget Office analysis.
The estimate covers the cost of replacing weapons used in combat, equipment lost during operations, additional flight activity and higher fuel expenses. The CBO’s assessment covers costs through August 1.
The monthly cost could vary depending on the intensity of the conflict. The CBO estimates that operations at the level seen in May and June would cost roughly $2 billion a month, while fighting at the higher intensity recorded in July would cost about $3 billion a month.
The CBO also cautioned that the monthly bill could rise further if military operations become more intense.
The estimate is close to the $37.5 billion figure Defence Secretary Pete Hegseth gave Congress in July.
Pentagon puts cost above $42 billion
A more recent Pentagon estimate provided to Congress puts the cost of the war at more than $42 billion.
The figure was given to congressional defence committees on August 13, according to a congressional aide cited by The Hill. It represents an increase of about $4.5 billion from the Pentagon’s previous public estimate of $37.5 billion.
More from BusinessThe Pentagon’s comptroller’s office has said the Defence Department and the Office of Management and Budget have provided Congress with more than 10 updates on the cost of the conflict, covering obligations, operational costs and unfunded replacement costs.
The comptroller’s office said its latest update was sent to Congress on August 28.
The CBO estimate covers costs through August 1, while the Pentagon’s $42 billion-plus figure was provided to lawmakers later in August.
Iran war adds to US inflation pressure
The economic impact of the conflict could extend beyond the Pentagon’s spending.
Disruptions to energy shipments through the Strait of Hormuz and shipping routes in the Red Sea have pushed up energy costs, according to the CBO. Higher oil prices can raise the cost of gasoline, diesel, jet fuel and other products across the economy.
The CBO expects headline personal consumption expenditures inflation in the first quarter of 2027 to be about 0.5 percentage points higher than projected in its February forecast.
Core PCE inflation, which excludes food and energy prices, is expected to be 0.3 percentage points higher than the earlier forecast.
The increase in underlying inflation is expected to emerge more slowly but persist for longer, potentially complicating the Federal Reserve’s decisions on interest rates.
Higher inflation could limit the central bank’s room to cut rates even if weaker economic activity creates pressure for monetary easing.
US weapons stocks face long replenishment
The conflict has also reduced US stocks of some munitions, particularly missile-defence interceptors.
The CBO said rebuilding some depleted inventories could take five years or more. The agency warned that lower stocks could constrain the US military’s ability to respond to another major conflict involving heavy use of ballistic and cruise missiles.
Replenishing those weapons would require additional federal spending, adding to the fiscal cost of the war.
The White House had requested more than $87 billion in additional funding in June, with about $67 billion earmarked for the Defence Department, including money to replenish munitions and cover military operational costs.
The administration has also sought a record $1.5 trillion defence budget for fiscal 2027.
Congress faces pressure over war funding
The rising cost of the conflict has increased pressure on Congress to approve additional military funding.
The House passed a roughly $95 billion package in July aimed at funding the Iran war and other administration priorities, but the measure has not advanced in the Senate.
The White House has also explored using the budget reconciliation process to provide hundreds of billions of dollars in additional defence spending.
The CBO noted that its $38 billion estimate does not represent the full economic cost of the conflict. It excludes some costs incurred by other federal agencies, as well as certain longer-term expenses.
The agency also said there is uncertainty around its estimate because the Pentagon did not provide all the information requested by CBO.
