While the US administration has said the Iran war has so far cost the Americans $29 billion dollars (€24.9 billion), its cost on European consumers and economy is already felt in higher food and energy prices –and those prices will likely not go down any time soon.
Author: Peyman Pejman
European Union Economy Commissioner Valdis Dombrovskis said late last month that higher energy prices will likely mean that the Euro-zone inflation rate will remain at 3.1 percent for the remainder of 2026 and 2.4 percent for 2027, much higher than the previous forecast of 1.9 percent.
Roxana Minzatu, Executive Vice-President of the European Commission, recently told the French television station France24 that the energy shock of the Iran war is likely to increase poverty in the 27-nation zone. She said one in five Europeans – about 95 million people – are already in risk of poverty and social exclusion.
Nearly a quarter of the world oil and one-fifth of the liquified natural gas (LNG) supplies pass through the Strait of Hormuz, which is now effectively blocked by both Iran and the United States. Eighty percent of those shipments are destined for Asia but Europe gets approximately 6.2 percent of its crude oil and 8.7 percent of its LNG through the Strait of Hormuz.
The European Central Bank is expected to increase interest rates this month, which will make it more expensive to borrow money, which would impact businesses and entrepreneurs.
Ultimately, how much the war costs will matter because it will impact global economy.
Justin Wolfers, Economics and Public Policy Professor at the University of Michigan in the United States, says US Defense Secretary Pete Hegseth was not lying when he invoked the $29 billion figure in his recent testimony before US lawmakers.
“He wasn’t lying. He was telling you an incomplete number. Their number is not the cost of the war. It’s the cost of bombs we’ve dropped so far,” Wolfers told a webinar by the Substack channel Iran War News. The real cost of war, he says, would be in hundreds of billions of dollars, if not trillions.
Professor Linda Blimes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy and a leading expert on public finance, says wars always cost more than expected.
“Throughout history, those who get into wars tend to be optimistic about the cost and about the length of time it will take. For example, Russia thought it could take control of Ukraine in a few weeks. President George W. Bush fired his economic advisor, Larry Lindsey, for predicting that the Iraq War might cost $200 billion (it ended up costing $5 trillion),” she said in an interviewed published on the Harvard Kennedy School website.
“We see the same pattern with Iran. The Trump administration expected that this war would be over quickly and would be relatively inexpensive. According to my calculations, those first few days cost at least $16 billion … [T]o put it in perspective, we fired more Patriot missiles in the first four days of the Iran war than we have given to Ukraine over the past four years,” she added.
Three ways the Iran war hits society beyond the battlefield
The cost of Iran war, say the experts, should be calculated in broader societal terms based on three factors.
First, it is the direct increased cost of energy. While oil prices are now hovering around $100 a barrel, that is about 40 percent more than what it was before the war started. Europeans are paying much higher prices to fill their cars than Americans.
Average gas prices in the United States on June 1 was $4.3 (€3.7) per gallon. A gallon is roughly 3.7 liters, making it about one euro per liter. According to the European Commission’s Weekly Oil Prices Bulletin released on 2 April 2026, the average price of Euro-super 95 petrol in the EU is €1.871.
The second reason is that the war has already increased food prices in the US and other countries and the prices will likely increase significantly.
Before the war, nearly a quarter of world fertilizer shipments, and a fifth of liquified natural gas (LNG), which is used in fertilizer feedstock, passed through the Strait of Hormuz.
“Over the past three years (2023-2025), the Gulf countries were the single biggest regional exporter of urea and ammonia (both nitrogen-based), and the second largest regional exporter of diammonium phosphate (DAP) and monoammonium phosphate (MAP) fertilizers,” says a report by the International Food Policy Research Institute (IFPRI), an international research center focused on agriculture and food systems.
Iran itself is a major global urea producer and exporter.
Where will food prices stabilize?
While grocery prices worldwide have increased already –at different rates in different countries and for different products– they are likely to increase much higher in the coming months and into 2027.
That is because many farmers purchase their fertilizers months before the spring planting season, when most fertilizers are used. Farmers who purchased their fertilizers before the conflict started might not feel the pain as much as those who have not. The next planting season, every farmer will likely have to pay higher prices.
The United Nations Food and Agriculture Organization’s (FAO) Food Price Index report last month said food prices rose in April for the third consecutive month to the highest level since 2023. The previous such continuous increase was seen after the Russian invasion of Ukraine.
The third consideration is diesel prices that is mostly paid by truck drivers who transport good and products, whether in the United States or inter-continentally in Europe.
According to an April report by the International Road Transport Union, since the start of the Iran war, diesel prices have increased 40 percent in the United States, 29 percent in Europe, and 25 percent in China.
The World Food Program reported in March that “food insecurity can reach record levels” in 2026 as a result of continued Iran war.
“New analysis by WFP estimates that almost 45 million more people could fall into acute food insecurity or worse (known as IPC3+) if the conflict does not end by the middle of the year, and if oil prices remain above USD 100 a barrel. These would add to the 318 million people around the world who are already food insecure,” the report said.
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