US faces billions more in Iran war costs as conflict drags on, CBO warns

The United States faces additional billions in war costs with Iran as the conflict continues, warns the nonpartisan Congressional Budget Office (CBO). As of August 1, 2026, the military has incurred approximately US$38 billion in expenses related to the war that began after US-Israeli strikes in late February 2026. The CBO predicts that monthly costs could range between US$2 billion and US$3 billion or more, contingent on the intensity of violence if the conflict persists.

The primary drivers of these costs include replacing expended munitions and equipment lost in battle, along with heightened fuel expenses for the military. The replacement of munitions alone reached US$21.7 billion by August 1, 2026, constituting the largest single component of military expenditures in the conflict. Moreover, the department has faced a significant opportunity cost - the depletion of missile defense interceptors, leaving the United States with a diminished inventory for several years to come.

The analysis was commissioned by Democratic lawmakers Brendan Boyle and others following a request from House Budget Committee Chairman. In July, Defense Secretary Pete Hegseth had estimated the war's cost at US$37.5 billion. The CBO estimates that the war's main economic impact on the US has been inflationary pressure due to oil and natural gas disruptions resulting from Iran's actions.

Blocking the Strait of Hormuz, a vital oil shipping lane, sent costs skyrocketing. The CBO forecasts that inflation in the first quarter of next year will be 0.5 percentage points higher than originally projected in February - specifically referring to the personal consumption expenditures price index. "Core" inflation, excluding volatile food and energy sectors, would also likely exceed earlier predictions by 0.3 percentage points.

This inflationary surge will also raise interest rates on Treasury securities, according to the report.