The cost of the US-Iran conflict has reached $29 billion according to Pentagon Comptroller Jay Hurst, representing a $4 billion increase from the figure provided to Congress just two weeks ago. However, war budgeting experts warn the ultimate cost could reach at least $1 trillion for US taxpayers. The escalating costs include short-term expenses such as munitions, carrier strike group maintenance, and replacement of destroyed assets like fighter jets and drones. Medium to long-term costs encompass facility repairs over the next 4-5 years, restocking higher-tech weapons systems, and veterans' care for 55,000 US troops potentially exposed to hazards in the region.
Iran's economy is facing unprecedented challenges as the war and US naval blockade take their toll. Iranians have been hit by spiraling prices for food, medicine and other goods, with the economic cost described as 'very substantial and unprecedented for Iran' by economist Hadi Kahalzadeh of Brandeis University. The closure of the strait has hiked energy prices across the world, but the impact is particularly severe in Iran where the war has marked another step in the ruin of a once large and prosperous middle class. By 2019, Iran's middle class had already shrunk to around 55% of the population, explained Mohammad Farzanegan, a professor of Middle Eastern economics at the University of Marburg. The war will likely push several million Iranians below the poverty line, according to a report published by the U.N.'s development agency in late March.
Oil prices are reflecting the growing uncertainty, with West Texas Intermediate trading near $107 a barrel and Brent crude at $107 per barrel, up from previous levels. WTI rose more than 4% to over $102 per barrel on Tuesday, while Brent crude reached $107 a barrel, as reported by multiple sources. WTI fell 0.9% to $101.2 a barrel, ending a three-day rally as investors grew nervous about the prolonged stalemate. The International Energy Agency (IEA) now sees world oil demand at 104 million barrels per day this year, 1.3 million barrels-a-day less than its pre-war forecast. The agency warns that global oil reserves are rapidly shrinking as the world draws oil inventories at record pace, with global oil stockpiles plunging by 246 million barrels between March and April to 7.9 billion barrels. The US Department of Energy warns oil prices will likely stay above $100 a barrel in the coming weeks, with some analysts predicting gas prices could eventually hit $5 per gallon.
According to Lloyd's List Intelligence, Iran has tightened its control over the Strait of Hormuz after establishing a new Persian Gulf Strait Authority and positioning itself as the sole gatekeeper for this strategic energy corridor. The agency is now demanding that vessels submit application forms for passage, an effort to control transit approvals and collect tolls. As reported by Investing.com India, Iran's Islamic Revolutionary Guard Corps (IRGC) has imposed a de facto 'toll booth' regime in the Strait of Hormuz, requiring vessels to submit full documentation, obtain clearance codes and accept IRGC-escorted passage through a single controlled corridor. The United Kingdom is sending autonomous mine-hunting equipment and anti-drone systems to the Strait of Hormuz, the British Ministry of Defence confirmed. Mounting supply losses from the Strait of Hormuz, now in excess of 1 billion barrels, have caused global oil demand to crater as businesses and households cut consumption in response to surging prices. Iran has approved separate transit deals letting Iraq and Pakistan move crude oil and LNG tankers through the Strait of Hormuz, highlighting Tehran's strategic control over a vital energy route.
President Trump has reiterated his ultimatum to Iran, stating 'We're either going to make a deal or they're going to be decimated.' As he departed for China on Tuesday, Trump told reporters that 'we have Iran very much under control' but insisted 'we're either going to make a deal or they're going to be decimated.' Trump dismissed Iran's latest proposal as 'garbage' and insisted that 'Iran cannot have a nuclear weapon. They will not have a nuclear weapon.' Iran's ambassador to China, Abdolreza Rahmani Fazli, said Beijing could help convey Tehran's demands to major powers, with Iran wanting any deal to include a permanent end to the war and the lifting of the U.S. blockade of Iranian ports. Lebanese and Israeli envoys are set to continue U.S.-mediated talks in Washington this week, though Hezbollah's leader Naim Qassem rejected any attempt to make the group's disarmament part of negotiations. Kuwait accused Iran of sending members of its Islamic Revolutionary Guards Corps to infiltrate Bubiyan Island, with four members arrested while two others fled after exchanging fire with Kuwaiti soldiers.
