Iran war costs climb beyond Pentagon’s $29 billion estimate
The Defense Department is seeking more money as analysts say the war’s full cost is spreading through energy markets, debt and growth.
By Daniel Okafor · Business Editor
3 min read
The Defense Department told senators it needs another $80 billion for U.S. operations tied to the Iran war, Fortune reported. Outside estimates put the broader bill far above the Pentagon’s $29 billion public figure, with costs showing up in federal borrowing, fuel prices and slower growth.
Fortune reported that U.S. and Iranian officials were still holding talks Tuesday on a preliminary deal to formally end the conflict, after nearly four months of fighting and a fragile ceasefire. The outlet said President Donald Trump had repeatedly described the war as over while negotiations continued.
Military costs are disputed
Acting Pentagon Comptroller Jules Hurst III told the House Armed Services Committee on May 12 that the war had cost $29 billion, according to Fortune. When asked this week for a newer estimate, the Pentagon referred Fortune back to that testimony.
Linda Bilmes, a Harvard Kennedy School lecturer who studies federal budgets, told Fortune the direct bill is likely closer to the $200 billion in additional Pentagon funding requested in March. She said that estimate includes troop deployments, repairs, maintenance and munitions for more than 50,000 troops.
Bilmes told Fortune the Pentagon’s accounting understates the cost because it values weapons already in inventory rather than what the government must pay to replace them. She said Tomahawk missiles used in Iran cost $1 million to $2 million to produce, while current replacement contracts run $3 million to $6 million.
The Center for Strategic and International Studies estimated that during the first seven weeks of the war, the Pentagon used at least 45% of its Precision Strike Missile stockpile, 50% of its THAAD interceptors and nearly half of its Patriot ballistic interceptor missiles, Fortune reported.
Bilmes also told Fortune that damage to U.S. military facilities in Bahrain, Qatar and the United Arab Emirates could require $200 billion to $300 billion in repairs over three to five years. Fortune cited a Washington Post analysis finding 228 severely damaged structures.
Energy costs hit consumers
Moody’s Analytics estimated that U.S. taxpayers and consumers have already paid at least $132 billion tied to the war, Fortune reported. Data firm Kpler said the conflict removed two billion barrels of oil from global supply, according to Fortune.
Brown University’s war-cost tracker estimated that Americans had paid an extra $61.7 billion for gasoline and diesel since Feb. 28, equal to $471.20 per household, Fortune reported. The tracker showed increases of more than $1.30 per gallon in Wyoming, Utah and Alaska, while Florida, Texas and Indiana saw increases below 80 cents per gallon.
Jeff Colgan, the Brown University political scientist behind the tracker, told Fortune that states where people drive more and use heavier vehicles faced higher household burdens. Fortune reported that gasoline prices have eased from a wartime average peak of $4.56, but experts and the U.S. energy secretary do not expect prices below $3 until next year.
Debt and growth risks remain
University of Michigan economist Justin Wolfers estimated in May that stocks were 5% lower than they would have been without the war, a decline worth $3 trillion, Fortune reported. The Institute for Economics and Peace estimated that the conflict had reduced global GDP by about 0.6%.
Federal Reserve economists Dario Caldara and Matteo Iacoviello projected that higher economic risk could leave one million fewer Americans working in a year, according to Fortune. The European Commission’s labor chief estimated that energy-price pressure could cost Europe as many as 1.3 million jobs in construction, transportation, metals and chemicals, Fortune reported.
Fortune reported that the U.S. national debt crossed $39 trillion less than a month into the war. The Government Accountability Office has warned that higher federal debt can raise borrowing costs, weigh on wages and make goods and services more expensive.
This story draws on original reporting from Fortune.