The war with Iran has cost the U.S. government approximately $38 billion and contributed to rising inflation, according to a new analysis by the Congressional Budget Office (CBO). The estimate covers direct costs through August 1.
The CBO's findings align with the Pentagon's most recent public accounting from July, which stated the war had cost $37.5 billion. A separate report from the Defense Department's inspector general estimated the cost at $33.4 billion between February 28 and June 30.
However, the CBO analysis indicates the war's price continues to escalate, projecting an additional $2 billion to $3 billion in monthly expenses for the conflict. The report also highlights a significant depletion of U.S. munitions, including air-defense interceptors, which could impair the military's ability to respond to future major conflicts.
While the nearly $40 billion expenditure is substantial, particularly given the U.S. carrying over $40 trillion in gross debt, the CBO estimate is lower than some initial projections. Democrats have criticized the spending, arguing the funds could have been allocated to domestic affordability issues. Representative Brendan Boyle, ranking member of the House Budget Committee, stated that the administration's focus on the war contradicts claims of inability to fund domestic needs.
The majority of the spending, $21.7 billion, is attributed to replacing munitions, including $13.1 billion for missile defense interceptors and $7.3 billion for land-attack cruise missiles. Other costs involve equipment repair and replacement, increased flight hours for air operations, and higher fuel expenditures. The estimate does not include the cost of damage to U.S. bases and facilities in the Middle East.
The Defense Department inspector general's report did, however, estimate the cost of repairing physical damage to U.S. diplomatic facilities in Iraq, Kuwait, Saudi Arabia, and the UAE at approximately $184 million. It also noted that Operation Epic Fury involved $22.3 billion in munitions spending and the loss of approximately $3.7 billion in aircraft and equipment, including four F-15 fighter jets, seven KC-135 tanker aircraft, and up to 30 MQ-9 Reaper drones.
Replenishing munitions stockpiles depleted by the war could take five years or more, the CBO estimates, suggesting the conflict's full cost will only become apparent as the Pentagon reinvests in rebuilding inventories and restoring pre-war capabilities. Despite assurances from administration officials denying munitions shortages, the Defense Department has urged the defense industry to increase weapons manufacturing.
As Congress's nonpartisan fiscal scorekeeper, the CBO's assessments are frequently used by lawmakers to debate spending decisions. The agency noted that its estimates are subject to uncertainty due to reliance on government databases and public reports, as the Defense Department did not provide requested information.
Democrats have also pointed out that the $40 billion figure does not include the cost of borrowing or future interest payments, meaning the actual financial burden could be higher.
Outside of Washington, the war's economic impact is evident in rising energy prices. The national average price for regular gasoline reached $4.33 a gallon, up from $4.01 a month prior, and diesel surpassed $6 a gallon. An Energy Department forecast projects gasoline prices will remain near $4 for the rest of the year.
The CBO anticipates the war will contribute approximately 0.5 percentage points to inflation in the personal consumption expenditures price index in the first quarter of 2027, largely due to increased energy prices stemming from supply disruptions in the Strait of Hormuz and the Red Sea. August's annual inflation rate stood at 3.4%, compared to 2.4% in February.
President Donald Trump has previously characterized the war as a short-term effort, but his timelines have shifted, most recently stating it would conclude immediately after the midterm elections.