War with Iran & the US Defense Budget

Focusing on what I know, a prolonged conflict with Iran - even via air strikes - will likely require a defense supplemental.

There are a lot of people offering takes on potential U.S. involvement in the Israeli war with Iran. I’m not going to dive into my own, partially informed opinions about what that might look like and what our strategic goals may be.

Instead, I wanted to look at what this might cost and the impact on the already dysfunctional FY 2026 defense budget process. The cost of any operation against Iran would very quickly run into the billions of dollars. In terms of estimating the cost, there’s three general scenarios I’m thinking through, all of which have very different impacts on the budget. All three scenarios likely require DoD to receive additional funding from Congress in what is certain to be an extremely combustible environment.

Air War ($5-$15 billion)

This scenario would be the US and Israel continuing to strike Iran from the air. We would likely expend quite a bit of our highly specialized bunker-busting inventory and have some light/spooky ground presence in order to target/confirm strikes, but functionally this would be air strikes and missiles.

This CRS report, while focused on the 2011 air operation against Libya, provides historical context on airpower-based conflicts provides a useful starting point for consider what an air war might look like from a cost perspective. The report is from 2011 and some of the conflicts go back to the 1990s, but its at least a useful metric for thinking about cost. Given that we’d be using very exquisite ground-penetrating munitions, this would be more expensive than most of the historical activity. Our strikes would also likely involve a significant number of anti-radiation missiles (to target missile defense radars)/more standard air-to-ground missiles.

Iran may attempt some escalation but it fundamentally does not significantly threaten maritime assets or escalate beyond missile strikes on U.S. facilities in the region.

Still, when accounting for inflation and the cost of penetrating munitions, this would run into the billions of dollars very quickly.

Maritime War ($15-$75 billion)

This scenario is one where Iran pushes back more firmly and attempts to close the Strait of Hormuz. It keeps basically all of the costs of the previous engagements but stacks in a ton of cost from naval operations. Whether or not the Houthis would choose to dive back in is unclear, but based on the burn rate from that engagement, you get a pretty good sense of how expensive this could be.

The cost here is driven by naval AMD stocks getting burned up fairly quickly and by costs to conduct surface operations in the Persian Gulf. This includes both direct increases in O&M costs from deployed ships and indirect costs as other ships are forced to extend operations to backfill. This increased bill also includes the replenishment costs of rapidly restocking munitions that are critical both for these operations and for deterring China in the Pacific.

This cost on the higher end also would take in successful strikes on US capital warships. Damage to amphibs, DDG-51s or a carrier would rapidly push costs upwards and that’s before we get into the sorry state of US maintenance yards.

GWOT Sequel ($75 billion+)

This scenario is one where ground forces end up deployed in Iran. No one seems to want this from a policy perspective, but military operations can take on a tempo and direction of their own. If the goal of the administration is really regime change, some deployments may be necessary to achieve this goal. Costs of any deployment of significant force to Iran would be massive. Operations in Iraq ran into the trillions of dollars and that is a smaller, less-populous country. Even limited excursions to eliminate missile sites along the coast or attempt to remove the regime would have significant logistical footprints.

Political Implications

The current FY 2026 budget process is a mess and Congressional Republicans are currently fighting their way through their ‘One Big Beautiful Bill’ reconciliation process. It’s likely that DoD could reshuffle money to conduct a lot of operations without an immediate impact, particularly if limited to the first scenario. Any shift into the second or third scenarios would almost certainly require additional funding. That request might not arrive until August or later, but would certainly provide a twist to the end of fiscal year fight.

This funding request would likely face opposition in both parties, though it seems likely that leadership from both sides would be mostly supportive. Congressional Democrats will face pressure not to support President’s Trump’s war but also not to appear to abandon America’s ally Israel. Congressional Republicans will see similar splits between factions supporting war with Iran and MAGA/America First proponents. Much will depend on how the US populace responds to actually moving into combat - if opposition remains high in polls, it may become difficult to avoid rolling this into a broader bill to limit exposure.

The overall outlook would be murky. It’s exceedingly rare to see Congress oppose funding to support active operations but if nothing else the past year has shown us that, in the current political environment, historical precedent may not be a useful guide.

In conclusion, even an air war with Iran would require billions of dollars in spending. Against the scale of the overall Department of Defense budget of $848 billion, some of these scenarios may seem insignificant, but facing a need to deter China and transition to a new generation of technologies, even the low-end scenario will likely require additional Congressional support. In an uncertain Congressional environment, the costs of war should be a consideration.