NEW YORK, Sept. 16 (Xinhua) -- The U.S. Congressional Budget Office (CBO) estimated that as of Aug. 1, 2026, the conflict with Iran has cost the Defense Department approximately 38 billion U.S. dollars.
The amount reflects the costs of replacing expended munitions and equipment lost in battle, increased flying hours, other operations, and increased fuel costs, as well as the fact that the initial, intense phase of the conflict lasted just over a month and that relatively few U.S. forces have been involved compared with the much larger and longer U.S. operations in Iraq and Afghanistan, said CBO in a report released Tuesday.
The estimate does not include costs borne by other parts of the federal government, nor does it include costs already accounted for in the federal budget, such as the basic operating costs of the military forces involved in the conflict.
As the conflict persists, the Defense Department's costs will continue to increase. CBO estimates that if the level of violence remained low, an additional month of conflict would cost 2 billion dollars; if the intensity of the conflict increased, the cost per month would soar to 3 billion dollars. Monthly costs could be higher still if the violence escalated further.
CBO estimates that the main economic impact of the Iran war consists of inflationary pressures caused by the reduction in shipments of oil and natural gas through the Strait of Hormuz and disruptions to shipping through the Red Sea.
In CBO's assessment, under higher energy prices, inflation in the price index for personal consumption expenditures (PCE) year on year will be 0.5 percentage points higher in the first quarter of 2027 than projected in February 2026, and core PCE inflation will be 0.3 percentage points higher than previously projected.
The nonpartisan agency estimates that the higher rates of inflation will boost interest rates on Treasury securities. Interest rates on 3-month Treasury bills will be nearly 0.2 percentage points higher in 2026 than estimated in February. By the first half of 2027, such rates will be less than 0.1 percentage point higher than previously estimated.
CBO said it was unable to estimate potential additional costs of the conflict associated with diplomatic operations and foreign aid, as such costs would depend on the outcome of the conflict. ■