The recent conflict with Iran has had significant financial implications for the U.S. military and economy, while also affecting President Trump's approval ratings amidst rising inflation.
The conflict with Iran, which lasted for 100 days, resulted in costs for the Pentagon estimated between $35 billion and $40 billion, alongside the tragic loss of 13 American service members.
As a consequence of the war, gas prices soared above $4 per gallon and diesel prices exceeded $5, leading to billions in additional expenses for American households and businesses.
Despite these challenges, President Donald Trump has proclaimed victory, even as inflation reached 4%, his approval rating fell to 37%, and the nation's oil reserves dropped to their lowest levels since 1983.
With an agreement signed and further negotiations planned, the U.S. war with Iran is currently paused. Trump expressed his view of victory on his social media platform, stating, 'YOU’RE WELCOME!' He highlighted the benefits of a memorandum of understanding aimed at negotiating with Iran over the next 60 days.
In his post, Trump asserted that oil production is stable, the threat of nuclear weapons from Iran has been mitigated, stock markets are thriving, job rates are at peak levels, and prices are decreasing, claiming, 'OUR COUNTRY IS STRONG, SAFE, AND RESPECTED LIKE NEVER BEFORE.'
However, an objective examination of the situation reveals a more complex reality. The war has not only resulted in significant financial expenditure but also raised humanitarian concerns, with over 7,500 civilians reported killed.
According to preliminary data from the Center for Strategic and International Studies (CSIS), the total cost incurred by the Department of Defense is around $40 billion. This figure encompasses expenses related to munitions, destroyed equipment, and damage to military bases, although it does not include operational costs already accounted for in the Pentagon's budget of over $1 trillion for fiscal year 2026.
The Pentagon has requested an additional $80 billion in supplemental funding, with less than $20 billion of that amount directly linked to immediate needs arising from the Iran conflict. This figure excludes costs for repairs to facilities and U.S. military bases in the region.
The most significant expenditure during the conflict was on munitions, with a noted high usage of advanced and costly weaponry. For instance, a Tomahawk missile, which costs approximately $2.5 million, saw the U.S. military deploy about a thousand of them, according to Mark Cancian, a senior adviser at CSIS.
Experts have indicated that the military's utilization of key missile inventory was substantial during the conflict. In June, Trump invoked the Defense Production Act to compel defense contractors to increase munitions production.
The daily expenses of the war decreased as it progressed, primarily due to less frequent strikes and reduced use of high-cost weaponry. CSIS estimates that the initial 100 hours of combat incurred costs of $3.7 billion, while by day 12, the cumulative expenditure reached approximately $16.5 billion.
Other federal agencies, including Homeland Security and Veterans Affairs, incurred costs of around $1 billion as a result of the war, with approximately $165 million attributed to increased fuel prices, Cancian explained.
The conflict has significantly impacted gas prices, presenting a challenge for Trump, who has emphasized fossil fuel independence as a key element of his agenda. Despite the U.S. being a leading oil and gas producer, the global market dynamics led to an increase in prices, with averages rising from below $3 per gallon to over $4 during much of the conflict.
As oil traffic resumes through the Strait of Hormuz, prices are expected to decrease, although it will take time. The current national average for gas was reported at $3.97 per gallon, with a brief drop below $4 for the first time since March 30.
Data from Brown University indicates that American households have collectively spent over $253 more on fuel than they would have without the war, with both everyday consumers and industries like agriculture feeling the strain of rising diesel prices.
Prior to the war, the average diesel price was about $3.80, but it reached over $5 by June 15, although it has since decreased. The increased diesel costs have resulted in an additional $27.1 billion in expenses for American consumers, according to the energy cost tracker.
The war has also driven up fertilizer prices, which may have long-term implications for the agricultural sector.
The U.S. emergency oil reserve, which is stored in salt caverns along the Gulf Coast, has been significantly depleted due to actions taken by both the Biden and Trump administrations in response to international conflicts, including the war in Ukraine. Currently, the reserve is at its lowest level since 1983, when it was first established during the Reagan administration.
For nearly four months, oil supplies from the Middle East have been disrupted, resulting in a global loss of approximately 1.15 billion barrels of oil, according to data from Kpler.
In response to the supply shortage, countries like Venezuela and Brazil have increased production, while the U.S. has shipped jet fuel to Europe and diesel to Australia. Additionally, the Trump administration lifted sanctions on hundreds of millions of barrels of oil from Russia and Iran, and 32 countries coordinated the largest release of emergency oil reserves in history.
Despite these efforts, oil companies have begun to deplete their own reserves to meet customer demands. A critical oil hub in Cushing, Oklahoma, has reached operational stress levels, with only 20 million barrels remaining in its tanks, creating challenges for maintaining adequate pressure in distribution pipelines.
Trump acknowledged the seriousness of this situation during a recent G7 meeting in Versailles, stating, 'You want to see bedlam? We run out of reserves in about four weeks.'
The president has faced difficulties in articulating a persuasive political narrative regarding the rising prices associated with his policies. He has previously dismissed concerns about affordability as a hoax, but more recently claimed, 'I love the inflation,' suggesting it could have been worse and asserting that prices would decrease sharply once the conflict ended.
There is a distinction between inflation rates decreasing—meaning prices do not rise as rapidly—and actual price reductions. Recent data from the Bureau of Labor Statistics indicates that annual inflation exceeded 4% for the first time in three years, largely driven by soaring energy costs. Although this is lower than the peaks observed during the pandemic, it remains double the rate the Federal Reserve typically aims for before considering interest rate cuts.
The ongoing inflationary pressures have influenced the Federal Reserve's recent decision to maintain interest rates, contrary to Trump's calls for cuts, despite the central bank being led by his appointed Chairman, Kevin Warsh.
Economic conditions have resulted in American paychecks not keeping pace with rising prices, with inflation outpacing wage growth in April and May—marking the first time this has occurred since 2023.
Despite these economic challenges, there are signs of cautious optimism among Americans. After three months of decline, consumer sentiment increased in June, according to a survey by the University of Michigan, although it remains below historical averages.
The general lack of confidence in the economy cannot be solely attributed to the war, as noted by CNN’s Bryan Mena. While market indices experienced declines following the onset of the war, Trump has consistently touted record highs in the stock market, despite widespread public pessimism regarding the economy, likely exacerbated by inflation and rising gas prices related to the conflict.
Bond markets have reacted to inflation concerns stemming from increased gas prices during the war, resulting in a rise in the benchmark 10-year U.S. Treasury yield to its highest level in over a year in May, although it has since slightly decreased.
This yield influences consumer loan rates, including those for credit cards, auto loans, and mortgages. As of last week, the average 30-year fixed mortgage rate was reported at 6.47%, a slight decrease from the previous week's 6.52%, which was near the year's high according to Freddie Mac. Higher bond yields have contributed to rising mortgage rates, creating barriers for individuals seeking home ownership.
The Federal Reserve, under Chair Kevin Warsh's leadership, has indicated a commitment to addressing price increases. The market anticipates potential rate hikes later this year, which could further elevate mortgage rates.
Trump retains a loyal base of supporters; however, his overall approval ratings have remained low, dipping below 40% before the war began. As of June 15, only 37% of Americans approved of his job performance, down from 38% in February.
Polls also reveal that Trump's management of both the economy and the conflict in Iran is viewed unfavorably, with a Fox News poll indicating that only 31% of registered voters approved of his economic policies and 35% approved of his handling of the Iran situation.
