US could incur up to $1 trillion in costs from Iran conflict

The weekend negotiations between the United States and Iran collapsed, and on Monday, April 13, the U.S. Navy began a blockade to prevent ships from entering or leaving Iranian ports. However, in the latest development, U.S. President Donald Trump said peace talks with Tehran could be resumed in Pakistan within the next two days. With the prospects for a negotiated settlement still unclear, U.S. military costs are rising rapidly. According to a Department of Defense report to Congress, the first six days of the joint military operation between the United States and Israel in Iran, which began on February 28, consumed $11.3 billion. According to CNBC, in a study published two days before the temporary ceasefire was announced earlier this week, Harvard Kennedy School professor Linda Bilmes warned that the military campaign in Iran could have serious long-term consequences for the U.S. budget and public debt for years to come. "Costs for the entire war for the United States could reach $1 trillion," the professor said. According to Bilmes’ estimates, costs incurred during the initial phase of the conflict were about $2 billion per day for 40 days of fighting. This includes ammunition costs, troop deployments, and damage to military hardware, including three F-15 fighters shot down by Kuwait’s air defense misidentification. However, Bilmes cautioned that the actual costs are significantly higher than the published figure from the Department of Defense. The reason is that the Pentagon often accounts for stockpiles at book value rather than the current replacement costs—which are much higher—to procure or replenish those weapons and equipment. “That accounting difference is one of the reasons the $11.3 billion figure published by the DoD during the conflict could in reality be nearly $16 billion higher. This also shows that figures released while fighting is ongoing tend to be much lower than actual costs,” Bilmes noted. Additionally, Bilmes argued that replenishing the U.S. stockpile will rise sharply as the government must buy more interceptor missiles and many other missiles under long-term contracts with Lockheed Martin and Boeing. She noted that each interceptor missile costs about $4 million, while the production cost of a drone used by Iran is around $30,000. In the long term, war costs could rise substantially due to the need to repair damaged military facilities in the Middle East, replenish stockpiles, and assist Gulf allies such as Kuwait, the United Arab Emirates (UAE), and Bahrain in restoring partially damaged infrastructure from retaliatory attacks by Iran. According to Bilmes, budgetary pressure would be even greater if lifelong disability benefits for about 55,000 American troops deployed in the region, exposed to toxins and environmental risks, are included. Meanwhile, the White House has proposed to Congress to raise the U.S. defense budget for fiscal year 2027 to $1.5 trillion. This figure does not include the $200 billion that the DoD proposed for the Iran conflict. “Even if Congress does not approve the full proposed increase, the base defense budget is very likely to rise by at least $100 billion per year. If there were no war with Iran, that increase might not be approved,” Bilmes said. She argued that such expenditures would intensify the already swollen budget deficit in the United States. During the Iraq War—the conflict that cost the United States roughly $2 trillion—debt held by the public remained below $4 trillion. Today that figure has surpassed $31 trillion, and Bilmes argued that most of that is the result of previous wars in Iraq and Afghanistan. “America is borrowing at a higher cost to finance the Iran conflict, at a time when the debt burden is already much larger than before. Therefore, interest payments alone could push total costs higher by billions,” Bilmes noted.