Trump’s war in Iran has wiped out 1.5 years of wage growth in America

The war that President Donald Trump launched against Iran on February 28 has imposed staggering costs—economic, humanitarian, and strategic—on the United States and the world, with American workers bearing a particularly heavy burden as inflation has erased every real wage gain they made during his second term.

According to the Consumer Price Index released this month, overall inflation reached 4.2 percent over the last year, the highest level in three years.

The energy shock from the war—driven largely by Iran’s effective closure of the Strait of Hormuz, through which roughly 20 percent of global oil supply typically moves—has pushed gasoline prices up more than 40 percent.

The national average price for a gallon of regular unleaded gasoline rose from under $3 before the conflict to $4.49.

The Price of a War: How Trump’s Iran Campaign Burned Through Billions and Erased American Wage Gains

The sudden burst in inflation, combined with slowing nominal wage growth, means the average hourly real wage for private-sector workers is now no higher than it was in January 2025.

The Economic Policy Institute, which calculated the erosion, warned that excessive inflation has so far been limited to energy and airfares. But as long as the war continued, the institute cautioned, there was a heightened threat that price increases would spill over to the broader economy, triggering a more permanent increase in the cost of living.

That threat materialized.

The Numbers, in Human Terms

The financial toll is almost impossible to grasp in the abstract, so consider it this way: Moody’s Analytics estimates the war has cost U.S. consumers and taxpayers about $132 billion so far. That breaks down to roughly $750 per household—or $100 billion in total household costs, driven primarily by the sharp increase in energy costs following the closure of the strait.

Mark Zandi, chief economist at Moody’s Analytics, said the cost passed on to households was the result of increased military spending and higher prices from oil supply disruption out of the Middle East.

By mid-April, Goldman Sachs calculated that higher gasoline prices represented roughly $140 billion in annualized headwind to household incomes.

Morgan Stanley’s conclusions were even blunter: a sustained 15 percent rise in gas prices is all it takes to fully offset the average bump in tax refunds from the administration’s tax cuts. Gas prices had risen 40 percent.

The Joint Economic Committee—Minority estimated that tariffs and the war with Iran cost each household more than $3,100 from 2025 through May of 2026.

“The financial pressure is now mounting quickly,” Zandi added, “particularly on already hard-pressed middle and lower-income households.

With the saving rate about as low as it ever goes, unless the war ends soon and energy prices come down, they will have little choice but to rein in their spending, weighing further on the already sagging economy.”

The Pentagon’s Tab

The direct military costs are themselves staggering. In the first six days alone, Pentagon officials told lawmakers in a closed-door briefing, the war cost more than $11.3 billion—an average of $1.88 billion per day.

By late April, Secretary of Defense Pete Hegseth estimated the cost at $25 billion. By mid-May, acting Pentagon Comptroller Jules Hurst told the House Appropriations Committee the figure was closer to $29 billion—though he acknowledged there were still major unknowns, particularly regarding aircraft damage assessment and military construction costs for damaged bases.

Independent analyses suggest the true figure is far higher. The Iran War Cost Tracker, which counts from the first strike on February 28 through June 16, estimates the total U.S. cost at $113.3 billion.

A more comprehensive analysis published in Popular Information estimated the cost through the first 60 days at $71.8 billion, including $15.8 billion for operations, $41.2 billion in munitions, $11.9 billion in damaged or destroyed military assets, and $2.9 billion in subsidies for the Israeli military.

The Hidden Costs

But the Pentagon’s figures tell only part of the story. Brown University’s Costs of War Project calculated that higher fuel costs to consumers since the start of the war have surpassed $40 billion—more than $300 per household—on top of the Pentagon’s direct military expenditures.

To put that $40 billion in context: it could pay for the entire federal Bridge Investment Program to repair more than 10,200 bridges nationwide. It exceeds the estimated $31.5 billion cost of overhauling the U.S. air traffic control system. It is twice the $18.9 billion proposed for federal electric vehicle charging programs.

The federal government itself has not been spared. The Pentagon purchases around 80 million barrels of fuel annually. The average price the Defense Department paid for fuel climbed from $154.14 per barrel in October to $195.72 in April—a nearly 27 percent increase in just six months.

The Taxpayers for Common Sense estimated that from the start of the war through mid-May, the additional cost to taxpayers from federal petroleum fuel consumption was at least $1.19 billion.

Then there is the cost of debt.

The war has been financed through additional borrowing. Based on the Pentagon’s incomplete estimate of $29 billion in direct costs, taxpayers could pay an additional $986 million in interest over the next year alone.

Based on the more comprehensive $71.8 billion estimate, that figure rises to $2.4 billion. Over the next decade, based on Congressional Budget Office projections, taxpayers face an estimated $10.9 billion to $26.9 billion in additional interest payments.

The 10-year Treasury yield surged to 4.58 percent due to the impact of the war, putting enormous pressure on government debt interest payments. The Financial Times calculated that the conflict could cost the U.S. tens of billions of dollars in additional interest payments on its public debt.

The Long Tail: Veterans and Climate

The costs will compound for decades. Linda Bilmes, a public finance professor at Harvard who famously predicted the true cost of the Iraq war years before it was widely acknowledged, estimates that at least one-third of the roughly 55,000 U.S. troops deployed in the conflict may ultimately claim veterans’ benefits tied to exposure to toxins, contamination, acid rain, dust from infrastructure destruction, and burning oil fumes.

“If veterans claim benefits at the rate of the extremely short 1990 Gulf War—37 percent of whom receive compensation today—this alone would add around $600 billion in costs over their lifetimes,” Bilmes said.

The environmental cost is also mounting. The first two weeks of the conflict generated more than 5 million tonnes of carbon dioxide equivalent emissions—surpassing Iceland’s annual emissions and matching the yearly output of roughly 110 million gasoline-powered cars. Researchers estimate this caused more than $1.3 billion in climate-related damage.

The Global Toll

The war’s economic devastation has not been confined to the United States. The World Bank cut its global growth forecast for 2026 to 2.5 percent due to the war and warned that growth could slow to just 1.3 percent if energy supply disruptions proved more severe and came with substantial stress in financial markets.

The Global Peace Index found that annual global GDP losses from the war would total $1.3 trillion under a partial reopening of the Strait of Hormuz and would amount to $3.5 trillion if the war resumed.

The Human Cost

Behind the numbers are lives. According to Iranian authorities, by late April the conflict had killed at least 3,468 people in Iran, around 40 percent of them civilians, and injured more than 34,000 others. In May alone, the United Nations verified 274 civilian deaths and 1,763 injuries—the highest monthly civilian casualty toll since April 2022.

Fifteen American troops have been killed and 538 wounded.

The Bottom Line

Bill Press, the political commentator, summed up the war’s outcome with brutal simplicity: “It’s hard to believe anybody could spend $113 billion and get nothing for it. Donald Trump just did. But, of course, it wasn’t his money. It was yours and mine.”

Harvard’s Bilmes projects that once all expenses are factored in—winding down the war, repairing damaged military bases, restocking munitions, and providing lifetime veterans care—the total direct military cost will exceed $1 trillion.

The war has erased 1.5 years of wage growth. It has cost each American household hundreds of dollars at the pump, thousands in lost purchasing power, and billions in future interest payments. It has destabilized the global economy, killed thousands, and left an environmental scar that will outlast the conflict itself.

The meter is still running.