Donald Trump’s war with Iran will likely drive inflation even higher next year, analysis suggests, creating a fresh headache as the president tries to shore up support ahead of the midterms.
The Congressional Budget Office said in a letter to Congress released Tuesday that the war could add roughly 0.5 percentage points to inflation during the first quarter of 2027, largely as reduced oil shipments through the Strait of Hormuz drive up energy costs.
“The main economic impact of the conflict with Iran consists of inflationary pressures caused by the reduction in shipments of oil and natural gas through the Strait of Hormuz and disruptions to shipping through the Red Sea,” the office said.
The gloomy outlook comes as the Trump administration scrambles to boost the Republican Party’s image with less than two months until the midterm elections, and the 80-year-old president’s approval rating is near record lows as voters grow increasingly frustrated over the cost of living.
Brent crude climbed from $64 a barrel in the final quarter of 2025 to a peak of $103 in the second quarter of 2026, CBO said in its letter.
Trump launched his war against Iran in February, confidently predicting that it would last just “a few weeks.” But the conflict is now in its seventh month, with no end in sight.
CBO estimates the war has cost the Pentagon about $38 billion as of August 1. Each additional month of fighting could add another $2 billion to $3 billion to the bill, according to the agency.
The Daily Beast has contacted the White House for comment.
When previously contacted by the Daily Beast for comment, White House spokesman Kush Desai said Trump “pledged to end Joe Biden’s generational inflation crisis, and the Administration has been laser-focused on delivering since Day One with a proven supply-side economic agenda.”
“The Administration has already slashed the prices of eggs, dairy, prescription drugs, and other household essentials, and more relief is on the way for everyday families,” Desai added.
Trump has faced scrutiny over his handling of the economy during his second term. Bringing down grocery prices was one of Trump’s central promises during the 2024 campaign, but persistently high costs have frustrated Americans. The president has been saddled with grim approval ratings, with voters pointing to his handling of the economy as a major source of dissatisfaction.
According to Politico, Trump administration insiders say his team is stressing about internal polling showing that grocery prices rank among Americans’ biggest cost-of-living worries.
Democrats have called on Trump to end the war, with Sen. Elizabeth Warren of Massachusetts describing the conflict as “a one-two punch that’s burning a hole in Americans’ pockets and burning a hole in our munitions supply, hurting our military readiness.”
Rep. Brendan Boyle of Pennsylvania, who requested the CBO report, said Trump and Republicans “have spent years telling Americans that we cannot afford to help families here at home, but apparently they can find tens of billions of dollars, and potentially much more, for a reckless war that is leaving Americans to pay the price.”
