The US-Iran conflict has cost the Department of Defense more than $38 billion through August 1, per the Congressional Budget Office, with another $2-3 billion per month possible if fighting escalates
Equipment losses alone total $3.7 billion, with hundreds of structures damaged at bases including Prince Sultan Air Base in Saudi Arabia and Camp Buehring in Kuwait, and at least 11 US military personnel killed
The CBO projects inflation 0.5 percentage points higher in Q1 2027 due to Strait of Hormuz and Red Sea shipping disruptions
Wrecked fighter jets and gutted barracks now have a price tag attached, and it is a big one. New photographs published by CBS News show the scale of damage at US bases across the Middle East, corroborating the Pentagon watchdog’s first formal accounting of losses from Iran’s drone and missile attacks. The nonpartisan Congressional Budget Office confirmed on Tuesday that the conflict, which began after US-Israeli strikes on Iran on February 28, has cost the Department of Defense approximately $38 billion through August 1 – a figure roughly in line with Defense Secretary Pete Hegseth’s earlier estimate of $37.5 billion given to the Senate in July. This is a reported actual cost to date, not a forward projection.
Tensions Rise Along Strategic Trade Routes
The CBO warns that ongoing costs could add another $2 billion to $3 billion per month depending on fighting intensity, and that estimate excludes personnel casualty costs or long-term veterans’ healthcare. Separately, equipment losses from the strikes – including a damaged Boeing E-3 Sentry aircraft at Prince Sultan Air Base – have reached $3.7 billion. Iran’s retaliatory blockade of the Strait of Hormuz, combined with ongoing shipping disruptions in the Red Sea, has squeezed global energy flows, which the CBO says will push inflation about 0.5 percentage points above its February projection by the first quarter of 2027.
What This Means for Your Portfolio and Wallet
Disrupted oil and gas shipments through Hormuz mean energy costs remain a wildcard for household budgets and corporate input costs alike. Elevated inflation forecasts also complicate the Fed’s rate-setting calculus, while defense-sector spending and munitions replenishment could shift capital toward aerospace and defense stocks even as broader fiscal pressure builds.
Strategic Positioning & Defense Ideas
Standard hedges against geopolitical and energy-driven inflation shocks include holding some exposure to energy or defense sector allocations, safe-haven assets like gold, and diversified currency exposure to reduce reliance on any single economy’s fiscal trajectory. Disclaimer: This analysis is for educational and informational purposes only and should not be construed as financial or investment advice.
What to Watch Next
Watch for further CBO cost updates, Pentagon supplemental funding requests, and shipping conditions through the Strait of Hormuz and Red Sea. Full reporting is available via Livemint and CBS News.
