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As the United States enters its seventh month of fighting with Iran, it is imposing significant short- and long-term costs. It’s not just the loss of American personnel and resources spent to date, but other strategic costs are rising and the bill will come.
The huge defense bill is getting bigger
There are a wide variety of estimates on the financial cost of the war, but all point to a significant outlay. Defense Secretary Pete Hegseth has publicly acknowledged that the United States has spent about $38 billion so far, including the cost of daily operations, the forward deployment of thousands of American troops, and the expenditure of thousands of conventional and precision munitions.
This estimate, however, does not cover damage to US military and diplomatic facilities in the Middle East. Media reports indicate that nearly two dozen US military facilities in the region, along with valuable military equipment located in hangars and on vulnerable runways, have been severely damaged by Iranian missile and drone attacks. Similarly, there have been multiple attacks on American diplomatic facilities since the war began, including attacks in Baghdad, Saudi Arabia, and Kuwait. The price tag to replace damaged military equipment, including dozens of aircraft, and repair, reinforce and relocate affected facilities and personnel will cost many billions of dollars.
To help defray these initial costs, the Trump administration is seeking a supplemental budget of nearly $90 billion, with about $67 billion to pay for the costs of the Iran war. Note that this is in addition to the Trump administration’s record $1.5 trillion defense request for 2027.
Wider economic impacts are evident
Rising security costs are not the only financial impact of the war. For example, due to the restricted flow of energy through the Strait of Hormuz, gas and diesel prices in the United States are about 30% higher now than before the war, costing Americans an additional $500 per household since the war began in February.
Given the collapse of the US-Iran memorandum of understanding and Iran’s ongoing campaign to assert control of the strait, most experts anticipate that commercial shipping through the strait is unlikely to reach pre-war levels for at least the rest of this year and perhaps longer, keeping oil prices high.
Meanwhile, rising energy prices are helping to fuel U.S. inflation, erasing wage gains for most workers in 2026. The war has also contributed to higher-than-expected U.S. interest rates, raising the cost of borrowing for most Americans.
And while the U.S. economy has been hit hard, the global impact has been worse. According to the World Bank, annual global growth is expected to fall from 2.9% to 2.5% in 2026, with the possibility of growth plummeting to just 1.3 percent if the emerging global energy crisis triggers a shock to global financial markets.
The bank has also cut growth forecasts for nearly two-thirds of countries due to the war, with Middle Eastern countries likely to absorb a particularly significant hit due to falling energy revenues. And as is well documented, global fertilizer shortages caused by disruptions to cross-strait traffic are leading to lower crop yields around the world, reducing food supplies and, inevitably, increasing food prices.
Iran’s regional influence is expanding
Aside from the economic cost, there are several other emerging (and worrying) consequences of the conflict. Iran, for example, is paradoxically poised to emerge from the war with internal damage but in a stronger regional position than it enjoyed at the start, with its conventional military nearly paralyzed but its arsenal of ballistic missiles and drones, as well as its proxy network, largely intact.
The Jerusalem Post reports that Israeli defense officials have been surprised by Iran’s ability to reconstitute its severely damaged military capabilities at this point in the war, including its ballistic missile arsenal. This follows recent reports from The New York Times citing US intelligence estimates that Iran’s ballistic missile inventory remains at about 70% of its pre-war level.
While the US airstrikes have significantly set back Iran’s nuclear program, Iran shows no signs of surrendering its remaining stockpile of enriched uranium and still maintains its deep technical expertise (especially with regard to advanced centrifuge development) with which it could potentially restart its program in the future.
Perhaps most troubling, Iran has demonstrated its ability to effectively threaten the strait through a combination of missile and drone attacks, indirect attacks on commercial shipping, and the laying of sea mines. This has increased Tehran’s influence over its Gulf neighbors, as well as spooking the global energy market; So far, the Iranian regime has shown no inclination to relinquish its control of the strait during on-again, off-again diplomatic talks.
America’s allies in the Gulf are fighting
Not surprisingly, the conflict has caused widespread damage to the Persian Gulf’s energy and civil infrastructure, the cost of which is causing unprecedented tensions in US-Gulf relations. According to reports from Washington PostUS allies across the Gulf are increasingly frustrated by the White House’s inability to manage the conflict diplomatically, and some are reportedly beginning to consider whether it is still prudent to host US military facilities. They undoubtedly fear that the presence of American facilities increases the likelihood of being targeted by Iranian missiles and drones.
Meanwhile, the Gulf States have recently accelerated their purchases of interceptor missiles and unmanned aerial vehicles, point defense systems and precision missiles, with many of these deals signed with American defense companies.
Several Gulf states are also strengthening their counter-drone collaboration with Ukraine and could consider expanding their partnerships with European and South Korean defense suppliers in the coming years if relations with the United States weaken further after the war.
Some analysts say the mutual defense pact signed earlier this month by Saudi Arabia, Türkiye and Pakistan reflects their growing discontent with Washington. It also highlights the intention of these nations to expand their security partnerships and reduce their dependence on the United States.
As other US alliances crumble
Unfortunately, the Iran war is not only damaging US-Gulf relations, it is also infecting US relations more broadly. Consider that in recent months the Trump administration has continued to attack its European partners for not supporting the US military campaign against Iran, even calling it a test of failed loyalty and threatening, in response, to withdraw some of the nearly 70,000 US troops based in Europe.
Similarly, President Trump expressed frustration last week over the unwillingness of South Korea, his former ally, to join the fight against Iran, threatening to scale back joint military exercises with South Korea and fueling concerns in Seoul about the reliability of U.S. security guarantees.
While much of this back-and-forth is likely rhetoric and diplomatic pressure versus concrete policy change, the president’s words are having an impact abroad, and any resulting deterioration in U.S. relations with NATO and South Korea stemming from frustration over the conflict with Iran would represent a significant war cost.
A final unintended effect of the conflict is that Russia is reportedly taking advantage of it to provide Iran (with which it has had long-standing defense ties) military intelligence and targeting assistance, while benefiting from the United States being bogged down in yet another crisis in the Middle East. Putin understands that every precision weapon the United States fires at Iran is one less it can offer Ukraine in its deadly conflict with Moscow. For its part, China appears less interested in gaining advantage from war than in managing the potential economic damage to the global trading system and its economy.
Unfortunately, the cost of war will likely increase
There is a chance that the administration’s latest effort to intensify economic pressure on Iran, which is triggering a sharp economic decline and causing great pain to the population, will eventually lead to Iranian concessions and a diplomatic breakthrough. That would be the best scenario to reopen the strait and limit the cost of this war. However, unfortunately I don’t think that’s the most likely outcome. Rather, Iran’s leaders appear emboldened by the current trajectory of the war (even threatening to go on the offensive soon if the US blockade of the strait is not ended) and apparently believe they can withstand the economic consequences of the war for much longer than the United States.
As I mentioned above, this increases the likelihood of a costly frozen conflict that progresses alongside continued economic disruptions, spasms of combat, and episodic diplomatic negotiations that ultimately never allow the Trump administration to meet its stated pre-war goals or achieve a final resolution to the war.
Therefore, while the price of the Iran war in blood, treasure, and diminished America’s global reputation is already high, the American public must prepare and understand that what it has experienced so far may be only a down payment on the final cost of the conflict.
