The $38 Billion Iran War Bill Is Only Part of the Cost, CBO Says

What the $38 billion actually measures

On September 15, the nonpartisan Congressional Budget Office released its assessment of the cost of U.S. combat operations against Iran.

CBO estimates that the Department of Defense had incurred about $38 billion in costs through August 1, 2026.

The figure includes replacing expended munitions and equipment lost in battle, additional flying hours, operational expenses and higher fuel costs.

It is therefore a direct Pentagon cost estimate — not a comprehensive price tag for every consequence of the war.

CBO excludes costs borne by other federal agencies. It also excludes basic operating expenses for military forces that would already have been funded even without the conflict.

That distinction matters because by the time Reuters reported on the study on September 15, the conflict was already about six months old, while CBO's $38 billion accounting stopped on August 1.

In other words, the $38 billion figure should not be described as the complete cost of six months of war.

Every additional month carries another multibillion-dollar bill

CBO does not give one fixed estimate for future monthly costs because the answer depends on how intense the fighting becomes.

If combat remains around the relatively low level seen in May and June, CBO estimates another month would cost approximately $2 billion.

If fighting rises to roughly July's intensity, the estimate increases to about $3 billion.

And if the conflict escalates beyond that level, monthly costs could climb further.

That makes the war's financial trajectory unusually sensitive to military tempo.

A relatively quiet month and a renewed period of intense strikes do not produce the same bill.

The harder problem is replacing what has already been fired

Money is only one part of the Pentagon's problem.

CBO identifies the large expenditure of missile-defense interceptors as the conflict's main opportunity cost for the Department of Defense.

Those weapons cannot necessarily be replaced quickly, leaving U.S. inventories reduced for several years.

Reuters reported, citing the CBO assessment, that replenishing some depleted stocks could take as long as five years.

That matters because the same interceptors would be important in another major conflict involving an adversary with large numbers of ballistic and cruise missiles. CBO specifically points to China as an example in the context of a possible conflict over Taiwan.

The strategic cost, therefore, is not just what the United States has spent.

It is also what the military may have less of available for another contingency.

A major caveat: the Pentagon did not provide CBO with requested data

CBO's estimate comes with a significant limitation.

The agency says the Department of Defense did not respond to its requests for information. CBO therefore relied on government databases and publicly available reports.

The agency explicitly describes its cost estimate as subject to considerable uncertainty.

There is another useful comparison.

In June, the administration requested $87.6 billion in supplemental appropriations, including $67.1 billion for the Department of Defense related to the conflict.

CBO says the portion of that request that appears directly tied to the war — $42.3 billion — is about 10% higher than CBO's own cost estimate.

The Pentagon and White House dispute the suggestion that the United States faces a dangerous shortage of munitions. Reuters reported that administration officials say U.S. forces retain sufficient stocks to meet the president's strategic objectives.

That leaves a clear factual disagreement: CBO warns that interceptor inventories will remain reduced for years, while the Pentagon argues that available stocks are sufficient for current strategic requirements.

The war is also showing up in inflation

The Pentagon budget is not the only channel through which the conflict is affecting the United States.

CBO says the main economic impact comes from reduced oil and natural-gas shipments through the Strait of Hormuz and disruptions to shipping in the Red Sea.

Those disruptions have pushed up energy costs, including crude oil, gasoline, diesel and jet fuel.

Higher energy prices then spread beyond the fuel market.

Transportation is embedded in the cost of almost every physical product. When shipping becomes more expensive, some of that increase eventually reaches consumers.

CBO now estimates that year-over-year headline PCE inflation in the first quarter of 2027 will be 0.5 percentage point higher than it projected in February 2026.

Core PCE inflation, which excludes food and energy, is projected to be 0.3 percentage point higher than CBO's previous forecast.

That does not mean the war accounts for all U.S. inflation.

It means CBO believes the conflict has added measurable inflationary pressure compared with the agency's prewar projection.

Why $38 billion cannot simply be added to every other consequence

CBO makes one warning especially clear.

Its military-cost estimate, opportunity-cost assessment, inflation effects and potential diplomatic or foreign-aid costs come from different methodologies, periods and levels of uncertainty.

They are not directly comparable and should not simply be added together into one grand total.

Some costs cannot yet be calculated at all.

CBO says it was unable to estimate additional expenses associated with areas such as diplomatic operations and foreign aid because those costs will depend on how the conflict develops.

Reuters also notes that future borrowing costs associated with financing the war are not included in the $38 billion figure.

That is why the significance of the CBO report goes beyond one large number.

It identifies three different costs already accumulating at the same time: Pentagon spending, military stocks that may take years to rebuild, and an energy shock feeding into consumer prices.

As long as the conflict continues, none of those accounts is closed.