Defense Secretary Pete Hegseth claims the Iran conflict has cost taxpayers $25 billion. But University of Michigan economist Justin Wolfers argues that's a dramatic underestimate. In a New York Times essay, he contends the true cost to the average American household runs to thousands—or even tens of thousands—of dollars. The Pentagon's figure only captures direct military expenses like missiles and aircraft, ignoring broader economic fallout.

Oil markets remain disrupted, with West Texas Intermediate futures for November 2026 hitting $86.12 per barrel. Fed economists estimate geopolitical risk has already cost roughly $200 billion and displaced about one million workers. Wolfers calculates stocks are roughly 5% lower than they would be otherwise—a loss of approximately $3 trillion in market value. Goldman Sachs projects the war will shave 0.5 percentage points from U.S. growth, potentially costing the economy $400 billion in lost income.

The administration has requested a $1.5 trillion defense budget for fiscal 2027—a 40% spike that works out to about $4,000 per household. Wolfers warns that if Iran successfully imposes tolls on tankers passing through the Strait of Hormuz, it could fund rebuilding the nuclear program President Trump vowed to destroy. Citing Linda Bilmes and Joseph Stiglitz's estimate that the Iraq war cost around $3 trillion, Wolfers concludes the Iran war will ultimately cost hundreds of billions, very possibly trillions.