Iran war driving up inflation for Americans, CBO report says

Key Points:

• The Congressional Budget Office (CBO) reports that the war with Iran has driven over one-third of the inflation increase this year, with inflation expected to rise further into early 2027, leading to higher borrowing costs for Americans.
• The conflict has caused a significant rise in energy prices, with gasoline up 45% and diesel up 66%, primarily due to reduced oil and gas shipments through the Strait of Hormuz and the Red Sea.
• Interest rates, including mortgage rates, have risen sharply since the war began, with the typical 30-year mortgage rate increasing from under 6% to 7.22%, and the Federal Reserve is expected to raise rates further to combat inflation.
• The war has also strained U.S. military resources, causing a shortfall in munitions and supply chain bottlenecks, with an estimated $38 billion spent so far and a five-year timeline to replenish expended munitions.
• The Pentagon has not provided the CBO with detailed information on damage to U.S. bases or repair plans, complicating cost assessments, while lawmakers like Sen. Elizabeth Warren have called for an end to the conflict due to its economic and military impacts.