Iran war has cost Americans $1,000 per household, economist estimates

The Iran war has cost Americans roughly $1,000 per household in higher fuel, food and other expenses since the start of the conflict in February, according to an estimate shared last week by Moody’s Analytics chief economist Mark Zandi.

Zandi’s analysis comes as government data shows inflation in May hit its highest level in three years, and with the U.S. and Iran yet to broker a lasting peace deal. The two countries exchanged military strikes over the weekend, threatening a fragile ceasefire. The sides will continue talks to end the conflict in Qatar on Tuesday, President Trump said on Monday. 

According to Zandi, the biggest war-related expense for Americans has been gasoline, which peaked at $4.56 a gallon on May 21 before dipping back below $4 a gallon earlier this month. Since the war began on Feb. 28, Americans have shelled out an additional $300 on average to fill up their tanks, he found, an estimate that only factors in the higher cost of regular gas. 

Higher diesel costs have also increased the cost of transporting products from farms, factories and seaports, leading to higher retail costs, Zandi said. He estimates the typical U.S. household has spent an extra $200 on groceries due to higher fuel costs since the start of the war.

Other war-related costs facing American households since the conflict started in February, according to Zandi:

• Higher interest rates —  an estimated $150 on average in added costs. As of January, many investors expected the Federal Reserve to cut its benchmark interest rate. But the surge in inflation stemming from the war has thwarted any plans by the central bank to lower borrowing costs, according to economists, with some forecasters even penciling in a rate hike later this year. That amounts to a missed opportunity for consumers and businesses, Zandi said.

• Higher airfare due to surging jet fuel costs —  an estimated $100 on average in added costs. Airlines have partially passed their higher fuel costs onto travelers, Zandi noted.

• Taxpayer costs to support U.S. military operations — an estimated $250 on average in added costs. According to Zandi, the U.S. is spending an additional $50 million per day to conduct the war against Iran. A separate estimate from U.S. officials who spoke to CBS News in April placed the total U.S. price tag for the conflict at $50 billion. A Pentagon official in April put the cost of the Defense Department’s Operation Epic Fury at about $25 billion, although that figure did not fully account for damaged or destroyed equipment or U.S. military installations. 

“My estimate that the Iran war has cost the typical American household $1,000 and counting is, if anything, conservative,” Zandi wrote. “The true cost is likely higher — meaningfully higher.”

Other researchers have also tried to tabulate how much the war has cost American households. Brown University researchers estimate that U.S. consumers have spent an additional $64 billion in total, or $486.41 per household, on gas and diesel alone since the start of the war. The Institute on Tax and Economic Policy, a nonpartisan think tank, puts the higher fuel costs at $427.50 per household.

In recent weeks, motorists have seen some relief. Gas prices are expected to continue to decline, though that hinges on the U.S. and Iran ceasing hostilities. On Monday, the national average for a gallon of gas was $3.86, down from $4.39 a month ago but up from $2.98 before the war started, AAA data shows. 

Patrick De Haan, a petroleum expert at GasBuddy, thinks gas prices could fall below $3 by year-end or early next year, assuming the U.S. and Iran end the war. 

According to a June Gallup poll, two-thirds of Americans reported experiencing financial hardship due to recent fuel price increases.