The conflict with Iran lasted a little over 15 weeks before a preliminary peace agreement between the U.S. and Iran was reached this week. However, the human and economic costs escalated quickly, with impacts extending well beyond the region.
Amid growing domestic and international pressure, U.S. President Donald Trump said on Monday that he and Vice President JD Vance had electronically signed a document the previous day with Iranian officials, formally bringing an end to the war. The hostilities reportedly began on February 28 when the United States and Israel launched strikes on Iran.
Even if oil shipments from the Middle East resume, economists and industry analysts say it may take some time before consumers notice any relief in prices at fuel stations, supermarkets, and other retail outlets.
Disruptions caused by tensions around the Strait of Hormuz affected not only crude oil and refined fuel supplies but also broader supply chains, including fertilizers, food products, and even footwear. Businesses expect elevated costs to persist for some time, suggesting that consumers may continue to face higher prices in the near term.
The overall cost of the war to the United States is estimated at around $132 billion, with final figures still being assessed as a 60-day negotiation period gets underway.
According to Moody’s Analytics, the burden on U.S. taxpayers and consumers amounts to at least $132 billion, reflecting the broader economic impact of the conflict. That factors in military spending, rising energy and commodity prices and interest rates, said Mark Zandi, the company’s chief economist, as reported by the New York Times.
A top Pentagon official told Congress last month that the cost had risen to around $29 billion for the military. That estimate did not include the price of repairing about a dozen U.S. bases in the region damaged by Iranian attacks.
The costs of repair and maintenance, as well as keeping carrier strike groups at sea, also need to be factored in. “It costs a lot of money to just keep everyone and all this apparatus deployed there,” said Linda Bilmes, a public finance expert and senior lecturer at the Harvard Kennedy School, as reported by the NYT.
She further noted that the cost of replacing the large volume of munitions used by the U.S. military is expected to be significantly higher than their original procurement expenses.
Iran also inflicted significant damage on other U.S. assets in the region, including a valuable military radar aircraft parked on a tarmac in Saudi Arabia and parts of the U.S. Embassy compound in Riyadh, according to reports.
Energy Prices
Americans have spent about $60 billion more on gasoline and diesel since the start of the conflict due to higher fuel prices, according to the Iran War Energy Cost Tracker from Brown University. This works out to roughly an additional $460 per household, with the total continuing to increase.
At the beginning of the war between the United States and Israel and Iran, average gasoline prices were about $2.98 per gallon, according to AAA, a non-profit motor club association. Since then, fuel prices have repeatedly surged and are currently close to $4 per gallon.
The international benchmark for crude oil has declined following the announcement of a peace framework on Monday, and is currently hovering around $80 per barrel. Earlier in March, prices had surged to approximately $120 per barrel.
The earlier spike in fuel costs has filtered through the broader economy, pushing up expenses linked to transportation, including airline tickets and the movement of commodities and manufactured goods.
Flights won’t get cheaper right away
Industry experts have cautioned for months that even after the war ends, travellers are unlikely to see an immediate drop in airfares. They note that airlines usually purchase fuel ahead of time, adjust operations gradually, and set ticket prices largely based on demand. As a result, reductions in oil and jet fuel prices often take weeks or even months to be reflected in the cost of commercial flights, AP reported.
“I think it’s unlikely that we’re going to see a retreat or reduction in the cost of flying at any point this summer,” Columbia’s House said.
Fuel surcharges that some airlines outside the U.S. added are one of the first areas where passengers might get a reprieve, said Gordon Ho, a professor at the University of Southern California’s business school, AP reported.
Fertiliser and Food
Disruptions to global trade caused by the closure of the Strait of Hormuz have driven up prices for several commodities, including sulfur, which is an important raw material used in certain fertilizers, NYT reported.
A Council on Foreign Relations report earlier this month by Máximo Torero Cullen, the chief economist of the Food and Agriculture Organization, said the disruptions in the strait would have consequences that “extend well beyond agriculture, threatening higher food prices, higher food inflation, reduced economic growth and increased hunger worldwide.”
Farmers remain strapped for fertiliser
Reopening the Strait of Hormuz would be a positive development for farmers and global food production, as around 30% of the world’s fertilizer previously passed through the waterway before the war. With supplies effectively disrupted, prices have surged, and experts say it could take considerable time for shipments to return to pre-war levels, as reported by AP.
The effects of the current shortage may continue to worsen in the future, even if conditions begin to stabilise.
Farmers across the world are currently entering planting seasons without adequate access to fertilizer or are being forced to pay extremely high prices for both fertilizer and fuel required to grow and transport their crops.
The World Food Program of the United Nations expects this to have a “devastating impact” on crop yields — and consequently, food prices and the availability of food — for months to come.
Shipping industry expects a slow recovery
Judah Levine, head of research at the freight booking platform Freightos, said the Straight of Hormuz closure has affected about 2% to 3 % of the total volume of container ships that are used for global shipping, but higher oil prices and disruption have impacted the shipping industry more broadly, AP reported.
Josh Steinitz, chief strategy officer of the business logistics platform ShipStation Global, said consumers might notice higher shipping costs and more out-of-stock items online until the end of the year.
“I think fuel surcharges, which then flow into shipping costs, which then get passed along to consumers, are still going to be with us for quite sometime from many of the major carriers,” Steinitz said, AP reported.
(With inputs from agencies)
