Iran war costs reach $1,000 per U.S. household in new estimate
Moody’s chief economist Mark Zandi says fuel, food, travel, taxes and borrowing costs have pushed the household bill higher.
By Hana Yoshida · Markets Reporter
3 min read
A new estimate from Mark Zandi, Moody’s chief economist, puts the Iran war’s cost to a typical U.S. household at $1,000 so far. The figure matters because Zandi says the burden is showing up in daily expenses, from gasoline and groceries to loan payments and taxes.
Zandi laid out the calculation in an opinion piece for the Philadelphia Inquirer, saying the total is still rising even as U.S. and Iranian officials discuss terms to end the conflict. Fortune reported that the talks include rules for shipping through the Strait of Hormuz, a key oil route that has been largely closed to traffic since the war began in February.
Fortune reported that oil prices have fallen back to levels seen before the war as ceasefire talks progressed, tensions eased and global demand weakened. AAA data cited by Fortune showed the national average for regular gasoline at $3.84 a gallon, about 23% higher than a year earlier and near a four-year high.
Zandi attributed about $300 of the household hit to gasoline costs. He assigned another $100 to higher airfares, saying jet-fuel costs pushed airlines to raise prices.
Diesel accounted for another large share of the estimate, according to Zandi. Because trucks and farm equipment rely heavily on diesel, he said higher fuel prices have added about $200 to grocery bills and other purchases that depend on transportation.
Zandi also included public costs tied to the military operation. He estimated that personnel, munitions and related expenses amount to roughly $250 per household in taxes.
The final $150 in his tally comes from interest costs. Zandi said the war’s effect on prices changed expectations for Federal Reserve policy, leaving households facing higher costs on credit cards, auto loans and mortgages.
Some costs remain difficult to measure, Zandi wrote. He pointed to fertilizer and helium as examples of items affected by the war that could later feed into food and semiconductor prices.
The $1,000 estimate is higher than Moody’s earlier assessment. Fortune reported that Zandi had previously posted an estimate of $100 billion in household costs, equal to about $750 per U.S. household.
The Trump administration has accused oil and gas companies of keeping gasoline prices artificially high despite the pullback in oil prices, Fortune reported. Experts cited by Fortune said pump prices can lag oil markets because of supply-chain delays and the time needed to restore normal traffic through the Strait of Hormuz.
Military costs could continue after a peace agreement, according to reports cited by Fortune. The Wall Street Journal reported that the Pentagon asked Congress in June for an additional $80 billion to cover Iran war costs.
Other expenses include repairs to 20 U.S. military sites in the Middle East that BBC reported were targeted by Iranian attacks. Fortune also reported that the military will need to replace fired munitions, while Military Times cited a congressional report tallying at least 40 U.S. aircraft damaged or destroyed.
Linda Bilmes, a public policy expert at Harvard’s Kennedy School, told Fortune that wars carry costs long after fighting ends. Including infrastructure repairs, restocking and disability payments for veterans, Bilmes estimated the Iran war could cost the U.S. economy more than $1 trillion, or nearly $7,500 for each of the roughly 134 million U.S. households.
This story draws on original reporting from Fortune.