US and Iranian officials remain deeply locked in talks to secure a permanent ceasefire in the war that has rocked the Middle East for months. For many Americans, however, no deal will be enough to replace what the war has taken from their wallets.
The peace talks between the two countries are still moving forward, and one of the key points to be discussed is how to control the movement of ships in the Strait of Hormuz. The waterway has been heavily clogged with traffic since the war began in February, sending oil prices soaring and pushing US gasoline prices higher as well.
Oil prices have returned to pre-war levels since ceasefire talks began, as tensions in the Middle East eased and global demand eased. But American drivers are still facing skyrocketing gas costs. The national average cost of a gallon of gas is now $3.84, up nearly 23% from last year, near a four-year high. For ordinary Americans who rely on a personal car to get to work, take their kids to school, buy groceries, and generally go about their lives, those costs have been rising.
“A thousand dollars,” wrote Mark Zandi, Moody’s chief economist, in an op-ed published last week by Moody’s. Philadelphia Inquirer.
“By my calculations, that’s the effective cost of the Iran war on the average American family — so far,” he added. “Although the US and Iran have agreed to end the war and are talking about ending the war, the costs are still mounting.”
Of that amount, Americans have already burned about $300 per household due to high gas prices alone. Some, writes Zandi, are used in an indirect way. Expensive fuel has caused airlines to raise prices, adding $100 to the bill. Grocery and daily shopping also saw higher prices thanks to diesel, the fuel of choice for trucks and heavy farm equipment. The war raised the price of diesel over regular gasoline, raising the cost of everything to be transported: That’s another $200, according to Zandi.
Then there are taxpayer-funded military expenditures, which include everything from personnel to weapons used. This amounts to an additional $250 in taxes per household. And finally, interest rates. The war’s upward pressure on rates has pushed back expectations that the Federal Reserve may opt to cut rates this year, with many analysts now predicting the Fed will raise them instead. Higher rates mean more expensive payments on credit card debt, car loans, and mortgages, adding another $150 to the military bill.
Some things that are affected by the war but are difficult to quantify can increase the total cost, Zandi wrote. Fertilizer and helium, for example, have both been subject to higher costs, factors that will ultimately affect food and semiconductor prices respectively.
“My estimate is that the war in Iran has cost the average American family $1,000 and counting, if anything, is coming,” Zandi wrote. “The actual cost is probably higher—much higher. It’s worth asking if it was worth it.”
The list is already higher than Moody’s last estimate of war spending on households. Last month, an article written by Zandi pointed to a total burden of $100 billion, which comes out to $750 for each US household.
The Trump administration has accused oil and gas companies of unfairly raising gas prices, pointing to lower oil prices. But experts have warned since the start of the war that there will be a delay between falling oil prices and making normal payments at the pump, because of congestion and the time it will take to resume pre-war traffic through the Strait of Hormuz.
And while fuel prices will eventually come down, American taxpayers may be saddled with the cost of war long after any peace deal is signed. In June, the Pentagon requested an additional $80 billion to cover its costs of the war on Iran, I The Wall Street Journal report. That’s on top of the Pentagon’s likely costs of repairing 20 US military bases targeted by Iranian attacks in the Middle East, as well as the need to replace downed weapons and at least 40 damaged or destroyed aircraft.
Some predictions have gone even further.
“Wars always have a long tail of costs,” Linda Bilmes, a public policy expert at Harvard’s Kennedy School, told me. Good luck in a recent interview.
Calculating its potential long-term financial consequences, including infrastructure repairs, asset recovery costs, and payments to disabled veterans, the Iran war could end up costing the US economy more than $1 trillion, Bilmes estimated. Based on the estimated 134 million households in the US right now, that would represent roughly $7,500 for each of them.
