$38 Billion War Tab Drives Up US Inflation Projections

The ongoing US-Iran war is expected to drive up inflation in the US by over 40% in Q2 2026, according to a new report from the Congressional Budget Office (CBO). The budget watchdog attributes this increase to disrupted oil shipments and rising costs, which are also expected to push mortgage rates higher. The CBO projects that inflation could worsen even further in early 2027.

The war has already cost the US $38 billion, with estimates suggesting it will rise by $3 billion a month. The Pentagon's largest single expense during the conflict is estimated to be $21.7 billion for replacing munitions used through August 1, 2026. It may take five years to replace all the munitions.

Oil prices have surged over 20% this month due to heightened tensions in the Persian Gulf, with Brent crude priced at over $107 a barrel. Goldman Sachs warns that global oil prices could reach beyond $120 a barrel if tensions continue. The national average gas price has increased by more than 40% since the conflict began in February.