Iran War Costs US $38 Billion as Houthi Threaten Saudi Oil
$38.1 billion. That is the latest estimate from the nonpartisan Congressional Budget Office for what the U.S. Department of Defense had spent on combat operations against Iran through August 1, 2026.
That figure is higher than the earlier $33.4 billion estimate released by the Pentagon's inspector general, which covered costs through late June.
The number matters on its own. What makes it more significant is what is happening at the same time roughly 1,000 miles away: Houthi forces have expanded their position along Yemen's Red Sea coast, Saudi Arabia has been working to restore oil-export infrastructure after a September drone attack, and crude prices remain elevated as several regional supply routes face pressure.
Inside the Pentagon's $33.4 Billion Bill
The inspector general's report, the first mandatory public accounting of Operation Epic Fury, breaks the earlier number down in useful detail. The Department of War estimated the operation at $33.4 billion as of June 29, including $22.3 billion for expended munitions, $3.7 billion for equipment losses, and $7.4 billion in cumulative incremental obligations.
Separately, the State Department reported $113 million in conflict-related costs as of June 2, while damage to U.S. diplomatic facilities in Iraq, Kuwait, Saudi Arabia and the United Arab Emirates was estimated at about $184 million.
None of that included infrastructure repair costs, meaning the June estimate was not a final tally.
The picture became clearer in September. The Congressional Budget Office estimated that DoD's operational, logistical and sustainment costs had reached approximately $38.1 billion by August 1. CBO also estimated that each additional month of fighting could add roughly $2 billion if combat remained at the lower May-June level, or around $3 billion if fighting stayed closer to July's intensity.
Why Munitions Stockpiles Matter More Than the Dollar Total
A budget shortfall is one problem. A munitions shortfall is a different kind of challenge, and it is the one the congressional analysis specifically highlighted.
Modern missiles and interceptors depend on specialized production lines, components, propellants, electronics and skilled labor. Those systems cannot necessarily be replaced as quickly as they are consumed.
The CBO estimated that the war had used between one-half and two-thirds of the U.S. inventory of certain missile-defense interceptors since June 2025. Rebuilding those stocks could probably take at least five years even if production rates were increased.
The issue is therefore not only how much Washington has spent.
It is how quickly the military can replace what it has used while preserving readiness for another major contingency.
Defense officials have pushed back against claims that the United States is running out of critical munitions. The CBO's assessment, however, points to a different concern: reduced inventory and long replacement timelines.
A Separate Crisis Is Building Around the Red Sea
While Washington tallies the cost of the Iran war, a related but distinct conflict is unfolding off Yemen's coast.
Houthi forces seized the port city of Mocha in September and advanced toward the Hanish islands, increasing their leverage near the Bab el-Mandeb Strait, one of the world's most important shipping chokepoints.
The consequences reach well beyond Yemen.
Disruption around Bab el-Mandeb can force vessels onto longer routes, increase insurance and security costs, delay deliveries and add pressure to an already stressed global energy system.
The threat is particularly important because it comes while the Strait of Hormuz remains disrupted by the wider U.S.-Iran conflict.
Saudi Arabia's Backup Oil Route Was Hit — and Is Now Recovering
Saudi Arabia's East-West pipeline was built to move crude toward the Red Sea without relying entirely on the Strait of Hormuz.
A September 11 drone attack attributed to Iraqi militias forced the pipeline to shut down and disrupted oil loadings at Yanbu.
But the shutdown did not remain permanent.
Saudi Arabia restarted the East-West pipeline on September 22, and crude and refined-product loadings at Yanbu resumed later in the month. By September 29, Reuters reported that tankers had loaded nearly 10 million barrels at Yanbu and nearby Al Muajjiz, with throughput estimated at roughly 2–2.65 million barrels per day and expected to rise further. Full restoration to the pre-attack rate was expected to take longer.
That changes the risk picture.
The Saudi oil system is no longer facing a complete outage on this route, but its recovery remains below normal capacity while the wider region continues to face security threats.
The Three Pressure Points Are Still Connected
Think of Saudi oil exports as relying on several parallel routes: Gulf shipping through Hormuz, the East-West pipeline, and Red Sea terminals such as Yanbu.
When one route is disrupted, the others can absorb some of the pressure.
The problem is that the broader regional conflict has placed several routes under strain at the same time.
Hormuz remains exposed to military and maritime risk. The East-West pipeline has only recently resumed after the September attack. And Houthi control along parts of Yemen's Red Sea coast creates additional uncertainty around Bab el-Mandeb.
Saudi Arabia has therefore been restoring alternative capacity rather than relying on one route alone. That does not remove the underlying risk, but it gives the kingdom more flexibility than it had during the initial shutdown.
Markets Are Already Pricing In the Risk
Oil traders do not wait for a physical shortage to become obvious before reacting. Expectations about future supply can move prices well in advance.
Brent crude climbed above $100 per barrel in September as attacks on shipping and energy infrastructure increased supply concerns. On September 24, Brent settled at $106.60 after Houthi missile activity against Saudi Arabia revived fears of further disruption.
Prices remained volatile into October.
On October 1, Brent reached about $102.31 before ending the session lower as markets assessed a mix of supply disruptions, renewed U.S.-Iran uncertainty and recovering Gulf exports.
The price movement is not being caused by one event alone.
It reflects the combination of disrupted Hormuz traffic, threats around the Red Sea, damage to regional energy infrastructure, tighter refined-product markets and uncertainty over how long the conflicts will continue.
The Ripple Effects Stretch Into Inflation
Higher crude prices rarely stay confined to gasoline.
They feed into shipping, aviation, manufacturing and other transportation-intensive industries. If the increase persists, those costs can work their way into broader consumer prices.
The Congressional Budget Office has already estimated that the conflict's energy effects will raise U.S. inflation. In its September assessment, CBO projected that PCE inflation in the first quarter of 2027 would be about 0.5 percentage points higher than it had expected before the war, while core PCE inflation would be about 0.3 percentage points higher.
That creates a difficult environment for policymakers.
An energy-driven inflation shock can complicate decisions over interest rates even when the underlying source of the pressure is geopolitical rather than domestic demand.
Four Headlines, One Connected Risk
It is tempting to treat the Pentagon cost estimate, the depleted missile-defense inventory, the Houthi advance and Saudi oil disruptions as four separate stories.
They are not entirely separate.
The U.S. military is absorbing a large financial and logistical burden from the Iran campaign. At the same time, the conflict is affecting the availability of defensive munitions that take years to replace.
Meanwhile, the Houthi advance in Yemen is placing another strategic shipping corridor under pressure, while Saudi Arabia is working to restore oil flows through infrastructure designed to bypass Hormuz.
The important point is not that every pressure point will remain at the same level.
It is that several of them can reinforce each other.
Why the Munitions Question Could Matter Beyond Iran
The stockpile issue has implications well beyond the current war.
The CBO warned that reduced U.S. interceptor inventories could become important in a future conflict involving an adversary with a much larger ballistic- and cruise-missile arsenal.
That does not mean such a conflict is inevitable.
It means the opportunity cost of the Iran campaign includes military resources that may remain unavailable until production catches up.
This is why the replacement timeline matters nearly as much as the headline dollar amount.
A missile fired in combat is consumed immediately. Replacing it may require years of procurement, manufacturing and testing.
The Saudi Oil Story Is No Longer Simply About a Closed Pipeline
The September pipeline attack initially created fears of a prolonged interruption at Yanbu.
The recovery has changed that assessment.
Saudi Arabia has restored pipeline operations and restarted exports, reducing some of the immediate supply risk. However, throughput remains below the system's full potential, and Houthi pressure around the Red Sea adds another security variable.
That means the Saudi energy system is functioning, but under more complicated operating conditions.
The wider market is also dealing with other disruptions. Fujairah, another major regional fuel hub, has seen inventories and imports recover from earlier lows, but its stocks remain below pre-conflict levels.
The result is a global energy market with more moving pieces and less room for a prolonged new supply shock.
The Wider Economic Cost Is Larger Than the Pentagon Number
The $38.1 billion CBO estimate measures direct Defense Department costs associated with the conflict.
It does not represent the total economic cost of the war.
Higher oil prices, more expensive transportation, disrupted trade, damaged infrastructure, military readiness costs and inflation all create additional effects across the U.S. and global economy.
CBO specifically noted that the conflict's impact on Hormuz and Red Sea shipping has increased energy prices and raised the cost of refined petroleum products such as gasoline, diesel and jet fuel.
That is why the headline military cost should be viewed as one part of a much larger economic calculation.
What Comes Next for the Energy and Security Picture
Several developments will determine how much longer these pressures remain elevated.
The first is the duration of the Iran conflict. CBO estimates that continued fighting would add billions of dollars to Defense Department costs each month.
The second is the condition of U.S. missile-defense inventories and the speed of industrial replenishment.
The third is whether Houthi control around Yemen's western coast expands further toward the Bab el-Mandeb.
And the fourth is whether Saudi Arabia can continue increasing East-West pipeline throughput and Yanbu exports toward normal levels.
These factors are connected, but they do not move automatically together.
A diplomatic breakthrough could lower some of the pressure quickly. Another round of attacks on energy or shipping infrastructure could reverse part of the recovery just as quickly.
The Bigger Risk Is Prolonged Pressure on Multiple Systems
The most consequential scenario for markets is not necessarily one dramatic strike.
It is a situation in which several moderate disruptions remain in place at the same time.
If Hormuz stays unreliable, Red Sea shipping remains exposed, Saudi alternative routes operate below capacity and U.S. military inventories require years to rebuild, the consequences can spread across energy markets, inflation expectations, government budgets and defense planning.
That would turn the conflict from a temporary military operation into a longer-lasting economic and strategic burden.
The recovery in Saudi oil exports provides some breathing room, but it does not remove the underlying vulnerabilities.
For the United States, the immediate challenge is balancing the cost of the Iran war with the need to rebuild depleted military stocks.
For Saudi Arabia, it is keeping alternative energy routes operating while facing continued regional threats.
And for global markets, the central concern remains whether today's disruptions remain temporary or become a more permanent feature of the energy system.
Amjad Ali Abid is a Senior Analyst at The American Times, specializing in U.S. Politics, Global Finance, and Economic Policy. With a focus on fact-based reporting, his analysis is based on primary sources, official data, and verified reports from Reuters, Associated Press, and U.S. Government releases.
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