Andrea Innocenti The conflict involving Iran broke out in late February and, while known for its geopolitical implications, is having a tangible economic impact on the daily lives of Americans. Analysis by Mark Zandi, chief economist at Moody's Analytics, reveals that the average household spending is already around $2.000.
This burden represents nearly half of the increase in income recorded by the average family over the past eight months, a figure that explains the conflict's widespread unpopularity.
Rising energy prices and their impact on household consumption
The main driver of the increased spending is the cost of energy . The average price of a gallon of gasoline has risen to $4,37, more than 50% from the $2,98 it paid before the outbreak of hostilities.
Diesel , on the other hand, is now over $6 a gallon, while military jet fuel has nearly doubled. Home heating fuel has also seen a significant increase as winter approaches, driving up heating costs for many families.
How energy costs translate to $1.100 per household
According to Zandi's estimates, the sum of all increases related to trucking, air travel, and home heating is around $1.100 per household . This figure includes both the price paid directly at the pump and the "indirect" effect of the higher costs of all transported goods, since fuel prices affect the final cost of a wide range of consumer products.
Effect of interest rates and military operations on household spending
In addition to the energy cost, the Federal Reserve has raised interest rates, pushing fixed-rate mortgages from the pre-war level of less than 6% to around 7,5%. This decline in mortgages has added approximately $540 to each household's annual expenditure. Meanwhile, ongoing military operations are adding an estimated $360 per household. These two factors, combined with the energy cost, explain how the total is approaching $2.000 per household.
Overall cost estimates and funding requests to Congress
The Pentagon, through acting Chief Financial Officer Jules Hurst III, announced in early May that spending already incurred by the military intervention was around $29 billion . At the end of June, the American Enterprise Institute revised the figure to $38,6 billion, while the Center for Strategic and International Studies estimated it at around $40 billion. To meet these costs, the White House has requested additional funding of $87 billion for stockpile replenishment and troop deployment in the U.S. Central Command (CENTCOM) area of responsibility . Approval of these funds will likely depend on the Democratic vote in the Senate, making the issue a delicate political and economic balancing act.