The Congressional Budget Office warns that the inflationary fallout from the Iran conflict will persist into 2027.
Not long after the United States stepped into hostilities with Iran, White House economic adviser Peter Navarro asserted with confidence that the confrontation would drive energy prices downward.
More than half a year later—while the fighting continues and the administration rebuffs congressional calls to terminate the conflict—that forecast has proven as unfounded as the once-promised rapid conclusion of the war.
Diesel costs surged to record highs this week, a direct result of supply lines disrupted by the ongoing hostilities. Earlier in the month, Brown University estimated that Americans had already borne more than $100 billion in higher gasoline expenses due to the war—and that figure predated the recent spike following attacks last week on a major Saudi pipeline.
Rising fuel prices represent the most immediate way families feel the war’s burden, but they hardly capture the full picture.
Nor does the eye-popping figure released by the Pentagon’s inspector general this week capture the entire cost. In a report issued Tuesday, auditors put the price tag for “Operation Epic Fury” at $33.4 billion, including $22.3 billion of munitions fired since February 28.
Yet that total covers only the war’s first four months—through June 29—and it “does not include costs for infrastructure repairs,” the audit notes.
The conflict’s toll on regional infrastructure is becoming more evident. The inspector general’s findings reveal that hundreds of buildings and facilities on American military installations have sustained substantial damage from months of Iranian drone and missile strikes.
Civilian infrastructure has also borne the brunt. This week, Amazon disclosed that data centers in Bahrain and the United Arab Emirates were damaged beyond repair. And, of course, there are the pivotal oil and energy supply chains—linking directly to the higher costs faced by consumers at home.
According to the Congressional Budget Office (CBO), the war with Iran was responsible for roughly 40 percent of the inflation Americans experienced in the second quarter of this year. A large portion of that rise is driven by higher gasoline prices, which not only raise fuel costs at the pump but also increase shipping costs for nearly everything.
The war has also contributed to higher interest rates. The CBO estimates that the conflict has pushed rates up by about 0.2 percentage points, with the expectation that those elevated levels will persist for several quarters. The agency now projects inflation in early 2027 to be roughly 0.5 percentage points higher than it had previously anticipated.
Confirmation arrived when the Federal Reserve voted on Wednesday to raise its benchmark interest rate by 25 basis points. In a statement issued after the decision, the Fed attributed the move to persistently elevated inflation.
All indicators point back to the Iran War. It costs taxpayers billions in direct expenditures, it makes gasoline and other fuels more expensive—contributing to inflation throughout the economy, it nudges interest rates higher, and it makes everything from mortgages to credit card payments less affordable. It has claimed the lives of 18 Americans and caused hundreds, if not thousands, of Iranian deaths.
If the Iran war had cost only $33 billion, that would be a travesty. The actual price tag, however, is significantly larger and continues to rise.
