Iran war costs rise: US burden of $132 billion amid global economic shock | Today’s news

The conflict with Iran lasted just over 15 weeks before a tentative US-Iran peace deal was reached this week. However, the human and economic costs escalated rapidly, and the impacts extended beyond the region.

Amid growing domestic and international pressure, US President Donald Trump said on Monday that he and Vice President JD Vance had electronically signed a document with Iranian officials the previous day that formally ended the war. Hostilities reportedly began on February 28, when the United States and Israel launched strikes against Iran.

Read also | US-Iran deal LIVE: Iran closes Hormuz over continued Israeli attacks on Lebanon

Even if oil supplies from the Middle East resume, economists and industry analysts say it may take some time for consumers to see relief in prices at gas stations, supermarkets and other retail outlets.

Disruptions caused by tensions around the Strait of Hormuz have affected not only oil and refined fuel supplies, but also wider supply chains, including fertilizers, food products and even footwear. Businesses expect the increased costs to persist for some time, suggesting that consumers may continue to face higher prices in the near term.

The total cost of the war to the United States is estimated to be around $132 billion, with final numbers still being evaluated as a 60-day negotiation period begins.

Read also | Iran can now sell oil. How fast can it grow?

According to Moody’s Analytics, the burden on American taxpayers and consumers is at least $132 billion, reflecting the broader economic impact of the conflict. That affects military spending, rising energy and commodity prices and interest rates, the company’s chief economist Mark Zandi said, as reported by the New York Times.

A top Pentagon official told Congress last month that military spending had risen to about $29 billion. That estimate did not include the cost of repairing about a dozen U.S. bases in the region damaged by Iranian attacks.

Repair and maintenance costs, as well as keeping aircraft carrier strike groups at sea, also need to be factored in. “It costs a lot of money to have everyone there and all that machinery in place,” said Linda Bilmes, a public finance expert and associate professor at the Harvard Kennedy School, as reported by the NYT.

She further noted that replacement costs for the large volume of munitions used by the US military are expected to be significantly higher than their original acquisition costs.

Iran also caused significant damage to other US assets in the region, including a valuable military radar aircraft parked on a tarmac in Saudi Arabia and part of the US Embassy compound in Riyadh, according to reports.

Energy prices

According to Brown University’s Iran War Energy Cost Tracker, Americans have spent roughly $60 billion more on gasoline and diesel since the conflict began due to higher fuel prices. That works out to about an additional $460 per household, with the total continuing to rise.

At the start of the war between the United States, Israel and Iran, average gasoline prices were about $2.98 a gallon, according to AAA, a nonprofit association of motoring clubs. Since then, fuel prices have risen repeatedly and are currently close to $4 a gallon.

Read also | Oil prices fall more than 1% on US-Iran peace deal; Brent is hovering around $78/barrel

The international benchmark for oil fell after Monday’s announcement of the peace framework and is currently hovering around $80 a barrel. In early March, prices climbed to around $120 per barrel.

The earlier surge in fuel prices rippled through the broader economy and increased costs associated with transportation, including airfares and the movement of commodities and manufactured goods.

They won’t discount the tickets right away

Industry experts have been warning for months that even after the end of the war, travelers are unlikely to see an immediate drop in ticket prices. They note that airlines typically buy fuel in advance, adjust operations gradually and set fares largely based on demand. As a result, lower oil and jet fuel prices often take weeks or even months to be reflected in the cost of commercial flights, the AP reported.

“I think it’s unlikely we’ll see a retreat or a reduction in the cost of flying this summer,” Columbia’s House said.

Fuel surcharges added by some non-U.S. airlines are one of the first areas where travelers can get a reprieve, said Gordon Ho, a professor at the University of Southern California’s business school, the AP reported.

Fertilizer and food

The disruption to world trade caused by the closure of the Strait of Hormuz has driven up the prices of several commodities, including sulfur, an important raw material used in some fertilizers, the NYT reported.

A Council on Foreign Relations report earlier this month by Máximo Torero Cullen, chief economist at the Food and Agriculture Organization, said disruptions in the strait would have consequences that “go beyond agriculture, threatening higher food prices, higher food inflation, reduced economic growth and increased hunger around the world.”

Farmers remain attached to fertilization

Reopening the Strait of Hormuz would be a positive development for farmers and global food production, as around 30% of the world’s fertilizer previously passed through the waterway before the war. With supplies effectively cut off, prices have soared, and experts say it could take a significant amount of time for supplies to return to pre-war levels, according to the AP.

The impacts of the current shortage may worsen further in the future, even as conditions begin to stabilize.

Read also | US-Iran peace deal: Reopening of Hormuz to ease fertilizer supply concerns

Farmers around the world currently enter the planting season without sufficient access to fertilizer or are forced to pay extremely high prices for both the fertilizer and the fuel needed to grow and transport their crops.

The United Nations’ World Food Program expects this to have a “devastating impact” on crop yields – and subsequently on food prices and food availability – in the coming months.

The shipping industry expects a slow recovery

Judah Levine, head of research at freight booking platform Freightos, said the closure of the Straight of Hormuz affected about 2 to 3% of the total volume of container ships used for global shipping, but higher oil prices and disruptions affected the shipping industry more broadly, the AP reported.

Read also | Around the Strait of Hormuz in 60 days

Josh Steinitz, director of strategy for commerce logistics platform ShipStation Global, said consumers may notice higher shipping costs and more out-of-stock items by the end of the year.

“I think the fuel surcharges, which then flow into transportation costs, which are then passed on to the consumer, will be with us for quite some time from many of the major carriers,” Steinitz said, the AP reported.

(With input from agencies)