Iran War Costs Mount to $40 Billion and Fuel Inflation, CBO Reports

The war with Iran has cost the U.S. government approximately $38 billion and exacerbated inflation, according to a new analysis released by the Congressional Budget Office (CBO). The nonpartisan agency’s estimate, which covers direct costs through August 1, aligns closely with earlier Pentagon figures but underscores that the financial burden of the conflict is still accelerating.

CBO estimates that the government will spend an additional $2 billion to $3 billion each month as long as the conflict persists. The report also warns that the war has significantly depleted critical U.S. munitions stockpiles, including air-defense interceptors, potentially impairing the military’s ability to respond to future major conflicts.

For the Trump administration, the findings present a complex political landscape. While Democrats highlight the substantial sum at a time when the federal debt exceeds $40 trillion and affordability remains a top concern for voters ahead of the midterms, administration officials argue the total is lower than some initial dire projections suggested. Rep. Brendan Boyle, ranking member of the House Budget Committee, criticized the spending, stating that the administration is finding tens of billions for what he called a “reckless war” while denying aid to American families.

The bulk of the $38 billion expenditure—$21.7 billion—is attributed to replacing munitions. This includes $13.1 billion for missile defense interceptors and $7.3 billion for land-attack cruise missiles. Additional costs have been incurred for repairing or replacing equipment, increased aerial operations, and higher fuel consumption. However, the CBO noted that its figures do not include damages to U.S. bases and facilities in the Middle East.

A separate report from the Defense Department’s inspector general, released the day before the CBO analysis, provided further detail on physical damages and losses. It estimated that repairing damage from Iranian strikes on U.S. diplomatic facilities in Iraq, Kuwait, Saudi Arabia, and the UAE costs approximately $184 million. The inspector general also reported that throughout Operation Epic Fury, the military spent $22.3 billion on munitions and lost around $3.7 billion in aircraft and equipment. Losses included four destroyed F-15 fighter jets, seven KC-135 tanker aircraft, and up to 30 MQ-9 Reaper drones.

The CBO cautioned that replenishing depleted stockpiles could take five years or longer, suggesting the true long-term cost of the conflict remains unclear until the Pentagon rebuilds its inventories. Despite these findings, top administration officials have previously denied claims of munitions shortages, though the Defense Department recently urged the defense industry to ramp up weapons manufacturing.

The CBO’s assessment provides Congress with an independent benchmark to evaluate the administration’s continued funding requests. Earlier this summer, the White House sought an additional $67.1 billion for the Pentagon, while House Republicans advanced a spending framework with roughly $73 billion in new defense and intelligence funding. Democrats have pushed back, citing a lack of clarity regarding the war’s duration and ultimate requirements. The CBO itself noted that its estimates are subject to considerable uncertainty because the Defense Department did not respond to requests for information, relying instead on public reports and government databases.

Beyond Washington, the economic impact is being felt by consumers. The national average price for regular gasoline rose to $4.33 a gallon, up from $4.01 the previous month, while diesel surpassed $6 a gallon. The CBO projects the war will add roughly 0.5 percentage points to the inflation rate for personal consumption expenditures in the first quarter of 2027, driven largely by energy price increases stemming from supply disruptions in the Strait of Hormuz and the Red Sea. Inflation reached an annual rate of 3.4% in August, compared to 2.4% in February.

Oil prices have remained above $100 a barrel due to ongoing uncertainty, disrupted shipping, and Houthi strikes on Saudi energy infrastructure. President Trump has recently asked Americans to accept higher prices as a necessary cost of preventing Iran from acquiring nuclear weapons, though his timeline for the conflict has shifted. Initially describing the war as a “short-term excursion,” Trump stated last week at a Republican convention in Dallas that the conflict would end “immediately after” the midterm elections.