US Iran conflict costs exceed $38 billion, budget office warns

A detailed cost analysis released by the Congressional Budget Office on Tuesday found that defence spending in the Iran conflict has already exceeded $38 billion as of August 1. The figures align closely with estimates provided by US Defence Secretary Pete Hegseth during Senate testimony, who cited costs of approximately $37.5 billion.

The CBO assessment indicates that ongoing military operations could require sustained monthly outlays of up to $3 billion or higher, contingent on the intensity of the conflict. The bulk of these expenditures stems from the replacement of munitions, equipment and materiel lost during combat operations.

Beyond immediate defence expenditures, the Congressional Budget Office cautioned that the conflict would contribute to inflationary pressures throughout the American economy. The agency projects inflation will run approximately 0.5 percentage points higher than previously forecasted, with impacts extending into the first quarter of 2027.

The inflationary effects are primarily driven by disruptions to global energy supplies, particularly the reduction of oil and natural gas shipments transiting the Strait of Hormuz. Additional upward pressure on prices stems from wider shipping disruptions affecting the Red Sea corridor, a critical global trade route.