A new US Congressional study concluded that President Donald Trump’s decision to go to war against Iran cost American taxpayers about $38 billion in direct costs during the first five months of the fighting, and will raise inflation by about 0.5 percentage points by early next year.

The US Congressional Budget Office said, in a letter sent to Democratic Representative Brendan Boyle, the top Democrat on the House Budget Committee, that “this amount reflects the costs of replacing spent ammunition and equipment lost in battles, increased flight hours and other operations, and higher fuel costs.”

The CBO estimate is consistent with Defense Secretary Pete Hegseth’s testimony before Congress in July, in which he said the war had cost $37.5 billion by that point. Each additional month of conflict will cost at least another $2 billion to $3 billion. “Monthly costs may be higher if violence escalates further,” the report said.

The impact of the Iran war on inflation

The report also provides the first government estimates of the war’s impact on inflation. Because of the disruption to oil and gas shipments through the Strait of Hormuz, the CBO now expects one of the key inflation indicators the Fed tracks to be about 0.5 percentage points higher in early 2027 than it forecast in February.

Core inflation according to the Personal Consumption Expenditures (PCE) price index, which excludes food and energy prices, is also expected to be about 0.3 percentage points higher than original expectations. The OBR said core inflation was slower to emerge, but would also be more persistent.

The war has also depleted munitions stocks, and rebuilding them could take five years or more, reducing the US military’s ability to deal with another major conflict, according to the report. This is consistent with a study conducted by the Inspector General of the US Department of Defense, in which he said on Monday that the industrial base cannot keep up with the shortage of ammunition.

“The shortage would become a particularly severe problem if a conflict erupted with an adversary possessing a large arsenal of ballistic and cruise missiles,” the budget office said, specifically pointing to the possibility of a conflict between China and Taiwan.

Trump downplayed the importance of this danger, stressing that the United States possesses “almost unlimited quantities” of munitions.

In June, Republicans in the House of Representatives approved a budget plan that allocates $73 billion to the military and intelligence services to cover the direct costs of the war in Iran. The plan stalled in the Senate, where Majority Leader John Thune said its approval would “most likely be a matter for discussion after the election.”

The budget plan comes in addition to a separate proposal to increase the regular budget of the US Department of Defense by $350 billion in mandatory spending, with part of this increase to be financed by targeting fraud in health care programs. The two plans may be combined after the November elections.