The Iran war directly cost the Pentagon $38 billion through July and is likely to consume $2 billion to $3 billion more per month if recent hostilities in the region continue, the Congressional Budget Office reported Tuesday. 

The CBO report’s estimate of the war’s direct impact on the federal budget is made up mostly of the cost of replacing expended munitions, as well as the fiscal impact of equipment losses and expenses such as fuel and extra military pay. 

Notably, however, the new estimate does not include the cost of repairing the numerous U.S. facilities in the Middle East that have been extensively damaged by Iranian attacks — damage that some experts reckon could cost billions of dollars, with the exact total hinging on the extent to which the U.S. government seeks to rebuild them and the degree of financial help from other nations.

Also not accounted for in the estimate, CBO said, are costs associated with diplomatic operations or foreign aid, nor expenses related to military personnel killed or injured, future veterans’ health care and disability compensation or spending or future maintenance costs for military assets used in the conflict, the report said.

“Donald Trump and Republicans have spent years telling Americans that we cannot afford to help families here at home, but apparently they can find tens of billions of dollars, and potentially much more, for a reckless war that is leaving Americans to pay the price,” said Rep. Brendan F. Boyle of Pennsylvania, the top Democrat on the Budget Committee, who requested the CBO report.

Munitions shortfall

President Donald Trump and Defense Secretary Pete Hegseth have downplayed the war’s effect on munitions stocks, but the CBO report said the U.S. military appears to have expended half or more of its antimissile interceptors in a little over a year — weapons that would be needed, the analysts said, in a potential war against a great power such as China.

“Although DoD does not reveal the number of munitions it has on hand, a comparison of the reported expenditures of missile defense interceptors with the total numbers that DoD has purchased to date indicates that the United States has probably used between one-half and two-thirds of its inventory of those munitions since June 2025,” the report said.

U.S. and Israeli forces struck Iran last June and launched the full-scale Iran war in February.

“The shortfall would become especially problematic if a conflict arose with an opponent whose arsenal included large numbers of ballistic and cruise missiles,” it said. “(The People’s Republic of China, PRC, maintains such an arsenal, which would probably play a major role in a military conflict involving Taiwan.)”

Rebuilding this antimissile inventory will probably take at least five years — even at more rapid rates of procurement, CBO said. 

Direct and indirect costs

The CBO estimate of the direct costs to the Pentagon is roughly consistent with Hegseth’s testimony to the Senate Appropriations Committee in July that the war has cost $37.5 billion. 

In fact, CBO said its estimate is largely derived from public reports because the Defense Department “did not respond to CBO’s requests for information.”

Besides the direct costs to the government and the opportunity cost of diminished munitions stocks, CBO’s analysts said more than 40 percent of inflation in “personal consumption expenditures” in the second quarter of 2026 was due to higher energy costs. Those costs rose due to supply disruptions in the Strait of Hormuz and the Red Sea, the report said.

In the first quarter of 2027, CBO projected that the war will add roughly 0.5 percentage points to personal consumption inflation, compared to CBO’s estimate before the war. 

This higher inflation, in turn, will raise interest rates on Treasury securities, the analysts said.

IG input

CBO’s findings emerged one day after a Pentagon inspector general report to Congress delivered a similar assessment of the war’s direct budgetary impact and its opportunity cost.  

The IG pegged the war’s cost to the Pentagon and State Department through June 29 at $33.4 billion for munitions replacement, equipment restoration and operational expenses. 

The IG estimate, like CBO’s, does not include the price of potential repairs to what the IG said are “hundreds” of U.S. military buildings and structures damaged or destroyed during the war in Kuwait, Bahrain, Qatar, UAE, Saudi Arabia, Iraq, Oman and Jordan. 

Trump administration officials have generally been tight-lipped about the damage to U.S. bases in the region. 

But acting Navy Secretary Hung Cao confirmed previous news reports when he said in an interview with The Epoch Times earlier this month that Iranian strikes “blew the hell out of” the Fifth Fleet headquarters in Bahrain, a major logistics hub in the region.

The IG report also mirrored the CBO assessment in its conclusion that the U.S. military is facing “strategic inventory shortfalls” in munitions as a result of the war.

The Pentagon has paid for the operational costs to date by shifting funds from training and maintenance programs, the IG said. 

At the same time, the White House has requested $67.1 billion in supplemental funds largely but not entirely to pay war-related bills such as replacing certain munitions. 

CBO estimates that nearly 37 percent of the supplemental request is not directly related to the war. Democrats have criticized the White House for seeking funds in the so-called war supplemental for deployment of National Guard troops to U.S. cities and to the U.S.-Mexico border and for strikes on alleged drug runners in the Western Hemisphere.

Paul M. Krawzak contributed to this report.