Iran war costs US military $38 billion as CBO warns of billions more in monthly expenses

The CBO said the estimate largely reflects the cost of replacing munitions expended during the conflict and equipment lost in battle, along with higher fuel costs for the US military and other expenses.

The US war against Iran has cost the Department of Defense more than $38 billion through August 1, with the conflict potentially adding another $2 billion to $3 billion or more each month, depending on the intensity of fighting, the nonpartisan Congressional Budget Office said on Tuesday (September 15).

“As of August 1, 2026, the armed conflict with Iran has cost (the Department of Defense) approximately $38 billion,” the CBO said in an assessment, referring to the war that began after US-Israeli strikes targeting Iran on February 28.

The agency warned that the monthly cost could increase further if the conflict escalates.

“These expenses could be higher still if the violence escalated further,” the CBO said.

What is driving the Iran war costs?

The CBO said the estimate largely reflects the cost of replacing munitions expended during the conflict and equipment lost in battle, along with higher fuel costs for the US military and other expenses.

The estimate does not include costs related to US military personnel killed or injured in the conflict, or longer-term veterans' healthcare and disability compensation.

The analysis was prepared following a request from Rep. Brendan Boyle, the top Democrat on the House Budget Committee, along with other Democratic lawmakers.

The estimate broadly aligns with an earlier assessment by Defense Secretary Pete Hegseth, who told the Senate in July that the Iran war had cost the Pentagon about $37.5 billion.

Iran war fuels inflation concerns

The CBO said the conflict's broader economic impact is being felt through higher inflation, primarily because of disruptions to oil and natural gas shipments.

Iran's retaliation included blocking the Strait of Hormuz, a critical waterway for global energy transit. The disruption, along with shipping problems in the Red Sea, has reduced energy flows and pushed up costs.

The CBO estimates that inflation in the first quarter of 2027 will be about 0.5 percentage points higher than it had projected in February, based on the personal consumption expenditures price index.

Core inflation, which excludes volatile food and energy prices, is also expected to be 0.3 percentage points higher than previously forecast.

Higher inflation could, in turn, push up interest rates on US Treasury securities, adding to the government's borrowing costs.

$87.6 billion White House funding request

The findings come as the Iran conflict enters its seventh month, with the war and elevated prices emerging as major issues ahead of the US midterm elections.

The White House requested $87.6 billion in supplemental funding in June, largely to support the war effort. Congress has not yet approved the request.

The CBO noted that its estimates are subject to considerable uncertainty because the Defense Department declined to provide information requested for the assessment. The budget office instead relied on government databases and publicly available reports.

Pentagon faces strategic inventory shortfalls

The cost of replacing weapons and equipment is also raising concerns about US military stockpiles.

A Pentagon inspector general report released on Monday said the war had resulted in “strategic inventory shortfalls.”

“This nonpartisan CBO report makes clear that the war has also cost American taxpayers tens of billions of dollars and counting, while continuing to drive up costs,” Boyle said.

He also criticised President Donald Trump and congressional Republicans over the spending, arguing that the administration was willing to spend tens of billions of dollars on the conflict while warning about the cost of domestic programmes.