War Against Iran Drives Up Inflation for Americans, CBO Report Says
The war against Iran is driving up inflation for Americans, according to a recent report from the Congressional Budget Office (CBO). The CBO found that the war was responsible for more than one-third of the increase in inflation this year. In the second quarter of 2026, the war contributed to over 40% of inflation, and it is estimated that it will account for half a percentage point of higher inflation during the first quarter of 2027.
The main driver of increased inflation is the reduced supply of oil and natural gas shipments through the Strait of Hormuz and the Red Sea. As a result, the average price of gasoline in the US has risen by 45% since the beginning of the war, reaching $4.32 as of Tuesday. Diesel prices have also increased significantly, with a 66% jump to a record high of $6.26.
The CBO report warns that interest rates are likely to rise as a result of inflation, making borrowing more costly. The rate on the typical 30-year mortgage was under 6% before the war started; it is now at 7.22%. Wall Street expects the Federal Reserve to raise its key interest rate this week in an effort to tame inflation.