Mar 23, 2026 16:42 pm IST

Opinion | A $500 Billion Bill: What Economists Won't Tell You About Iran-Israel War

On February 28, 2026, the United States and Israel began strikes on Iran. By the end of six days, the Pentagon had spent $11.3 billion.

Aditya Sinha Aditya Sinha

In 1916, as Europe was converting its young men into statistics, an American economist named JM Clark sat down to ask a question nobody in power wanted answered: what, precisely, does a war cost? Not the spiritual cost, not the civilisational cost, not the kind measured in widows and orphans. He meant money. His answer, published in the Journal of Political Economy, was careful and devastating. Direct costs were only the beginning. The real damage lay in what he called the indirect costs. The production foregone, the trade disrupted, the capital consumed and never replenished. War was the single most efficient mechanism humanity had devised for destroying wealth.

One hundred and ten years later, we are still learning this lesson. We are, as a species, slow students.

On February 28, 2026, the United States and Israel began strikes on Iran. By the end of six days, the Pentagon had spent $11.3 billion. Not allocated. Not requested. Spent. By week two, the White House's own National Economic Council revised the figure to $12 billion, presented as a routine accounting update. The war was, officials noted, "proceeding on schedule". Nobody appeared to find the phrase alarming. War has acquired the cadence of project management. It runs at approximately $900 million a day.

The $12 billion is the smallest number in the ledger.

Only The 'Direct' Costs

It is what economists call the direct, visible, immediate fiscal cost. It does not include the aircraft carriers repositioned from the Indo-Pacific, whose depreciation was already on the books. It does not include the veterans who will spend the next thirty years negotiating with a disability system not designed to receive them. And it does not include what is happening right now in the Strait of Hormuz, which is the figure that should unsettle every government on earth, including all those who did not choose this war.

Through that narrow passage flows roughly a fifth of the world's oil, a fifth of global liquefied natural gas, 22% of globally traded urea, 24% of aluminium, 33% of helium, and 45% of sulphur. Iran, whose navy has lost more than 50 ships to American strikes, retains virtually all of its mine-laying craft. The economic war compounds daily even as the military contest winds down. This is not incidental. It is a deliberate strategy.

Brent crude stood at $72 a barrel on February 27. By mid-March, it had crossed $106. After Iran struck Qatar's Ras Laffan industrial complex on the night of March 18, Brent briefly touched $113, an 83% rise since the start of the year. US natural gas jumped 6.5% in a single session. European gas prices rose to EUR 54 per MWh.

The Ras Laffan Catastrophe

The Ras Laffan strikes deserve a paragraph of their own, because they are unlike anything else in this ledger. Iran fired five ballistic missiles at the complex: four were intercepted, one struck. Hours later, a second attack set fires that Qatari civil defence teams spent the night containing. QatarEnergy reported "sizable fires and extensive further damage" to several of its LNG facilities.

Ras Laffan covers 295 square kilometres, roughly one-third the area of New York City. It is home to Shell's $18 billion Pearl GTL plant, QatarEnergy's LNG export terminals, and........

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