Iran War Predicted to Drive US Inflation Spike

The Congressional Budget Office (CBO) has released an analysis of the US war with Iran, predicting that it will cause a spike in inflation for the first quarter of 2027. The CBO estimates that the war will add approximately 0.5 percentage points to inflation during this period, largely due to higher energy costs caused by the conflict.

The CBO attributes the projected increase in inflation to 'inflationary pressures caused by the reduction in shipments of oil and natural gas through the Strait of Hormuz and disruptions to shipping through the Red Sea.'

According to the CBO, the war has already cost approximately $38 billion through August 1. The estimate does not include the cost of repairing US facilities damaged during the war.

The CBO also estimates that the cost to replace expended munitions is around $21.7 billion, with most of this expense coming from land-attack cruise missiles and missile defense interceptors.