What the CBO found about direct military costs
The CBO tallies $38.1 billion in Pentagon outlays through Aug. 1 and says each further month of fighting could add $2 billion to $3 billion. Over half of the bill stems from refilling missile and munitions inventories. Since June 2025, the U.S. has used up as much as two thirds of its missile-defense interceptors, driven largely by U.S. assistance to Israel's defenses against Iranian attacks, which CBO says will leave the United States with reduced stocks for several years.
CBO adds that "Rebuilding DoD's inventory of interceptors would probably take at least five years - even if production was increased," and warns that a gap like this could be particularly troublesome in a clash with a military that fields many ballistic and cruise missiles, pointing to China and a potential Taiwan fight.
How the CBO tied operational costs and equipment losses to the bill
CBO attributes $10.4 billion to extra flying time and $2.7 billion to pricier fuel, noting that fuel costs worldwide have climbed since President Donald Trump launched the war on Feb. 28. An earlier Pentagon tally, current through June 29, placed total costs at $33.4 billion, with $22.3 billion earmarked to replace spent munitions, $7.4 billion for incremental operating costs, and $3.7 billion to cover equipment losses.
According to the Defense Department's inspector general, the rapid tempo of weapons use created "strategic inventory shortfalls," and restocking has been complicated by a lack of solid rocket motors, plus shortages of explosives and propellants, and skilled workers. Iranian strikes also hit infrastructure across the region, damaging or destroying "hundreds of buildings and structures" at bases in eight Middle Eastern countries. For context, an F-35A can run as high as $92 million, per the U.S. Air Force; by comparison, the out-of-production F-15E carried a 1998 price tag of $31.1 million.
According to the Pentagon report, the State Department faced $79.2 million in expenses to handle efforts to extract people from the region and to cover additional potential needs at the outset of the war. It also put the damage to diplomatic facilities at $184 million across Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates. The Defense Department offered no estimate for reconstruction nor any explanation of how repairs to damaged military bases would be financed.
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Broader economic effects and political context
CBO links the war to higher consumer prices through reduced oil and natural gas shipments via the Strait of Hormuz and shipping disruptions in the Red Sea. "The price of almost every product reflects shipping costs," it notes, and by early 2027 about 40% of the war's impact on consumer prices is projected to come from gasoline and other fuels. By the first quarter of 2027, CBO expects year-over-year PCE inflation to be 0.5 percentage points higher and sees core PCE 0.3 points higher, with energy costs cascading through supply chains.
Energy markets are already on edge. U.S. crude climbed past $106 on Tuesday, and Brent moved above $109 after reports that Saudi Arabia halted shipments because a key pipeline that routes around the Strait of Hormuz was shut. Across the country, the average price for regular gasoline was about $4.33 per gallon, nearly 18 cents higher than a week ago and $1.15 above a year earlier, AAA said.
Rep. Brendan Boyle, D-Pa., the top Democrat on the House Budget Committee, requested the CBO report. The estimates arrive alongside the first comprehensive accounting of costs and military damage from the Defense Department's inspector general, released late Monday, and the two assessments reach similar bottom lines. The release lands as Democrats run on opposing the war before the Nov. 3 U.S. election, highlighting higher prices for fuel, food, and more linked to the conflict. Trump initially said the war would last only weeks and has cast it as an effort to keep Iran from developing nuclear weapons.
What investors should watch
This war is hitting two wallets at once: the Pentagon's and yours. Missile restocking, longer flight hours, and higher fuel costs are piling up, while bottlenecks in key components mean rebuilding interceptor inventories will take years. At the same time, squeezed oil flows and snarled shipping are feeding into inflation that CBO quantifies through early 2027. If you are keeping tabs on your budget and portfolio, watch how defense procurement timelines, oil flows, and inflation trends evolve from here.
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