Can the West afford another war with Iran?

Dr. Ahmed Moustafa, Director & Founder, Asia Center for Studies & Translation, Egypt

Whenever U.S. administrations speak of the “military option” against Iran, public attention tends to focus on combat capabilities, advanced weapons systems, and alliance structures. Yet economists and energy analysts argue that the more pressing question is no longer whether the United States can wage another war, but rather whether the global economy can afford one.

After years of persistent inflation, supply chain disruptions, the war in Ukraine, and mounting public debt across advanced economies, the economic environment surrounding any large-scale confrontation with Iran differs fundamentally from that of previous Gulf conflicts.

Analysts increasingly contend that modern warfare is measured not only by the number of aircraft carriers, fighter jets, or precision-guided missiles deployed, but also by a nation’s capacity to finance prolonged military operations, secure reliable energy supplies, and preserve domestic political and economic stability.

The Strait of Hormuz: The World’s Strategic Chokepoint

The Strait of Hormuz remains one of the world’s most strategically significant maritime corridors, carrying a substantial share of global oil and liquefied natural gas exports from the Gulf.

Energy experts warn that even a temporary disruption to shipping through the Strait could immediately affect crude oil prices, maritime insurance premiums, freight costs, and ultimately food prices, inflation, and electricity markets across the globe.

Although energy markets possess mechanisms to absorb short-term disruptions, analysts caution that a prolonged interruption would place considerable pressure on energy-importing economies and increase uncertainty across global financial markets.

Are Strategic Oil Reserves Enough?

The United States and several industrialized nations maintain strategic petroleum reserves designed to cushion short-term supply disruptions during major crises.

However, energy specialists note that rebuilding these reserves following their use in recent years requires both time and substantial financial resources. More importantly, they argue that strategic reserves are intended to mitigate temporary shocks rather than replace sustained commercial oil supplies during an extended geopolitical crisis.

Economists therefore caution against viewing emergency stockpiles as a long-term substitute for stable global energy flows.

The Price Tag of War

According to estimates published by several U.S. research institutions, a large-scale military confrontation could cost anywhere from tens to hundreds of billions of dollars, depending on the duration and scope of military operations.

The financial burden extends far beyond direct defense expenditures. It could include:

Higher global energy prices.

Rising shipping and maritime insurance costs.

Disruptions to international trade.

Declining business investment.

Increased inflationary pressures.

Higher government borrowing and debt-servicing costs.

Economists argue that these cumulative effects would ultimately be felt by consumers on both sides of the Atlantic, particularly if the conflict coincided with a broader slowdown in global economic growth.

America’s Domestic Political Calculus

The political landscape in Washington appears far less unified today regarding another major overseas military engagement.

Congress continues to debate the constitutional limits of presidential war powers, while a growing number of lawmakers advocate stronger congressional oversight before authorizing prolonged military operations.

Meanwhile, many segments of the American public have become increasingly sensitive to the economic costs of foreign interventions, particularly amid persistent inflation, elevated household expenses, and concerns over the federal debt.

Political analysts suggest that any prolonged conflict could quickly evolve into a defining domestic political issue, regardless of which party controls the White House.

NATO Faces a Complex Equation

Within NATO, member states confront widely differing economic and political realities.

Although most allies have significantly increased defense spending in recent years, they continue to grapple with sluggish economic growth, elevated energy costs, inflationary pressures, demographic challenges, and the substantial investments required for the energy transition.

Analysts believe these structural differences could complicate the Alliance’s ability to sustain a prolonged military commitment should another major regional crisis emerge.

Ukraine and the Reassessment of Military Power

The war in Ukraine has demonstrated that modern conflicts are determined not solely by battlefield superiority but also by industrial capacity, manufacturing resilience, logistics, and supply-chain security.

The ability to sustain ammunition production, replace military equipment, and maintain uninterrupted defense supply chains has become as strategically important as technological superiority itself.

Defense experts argue that these lessons are prompting Western governments to reassess their readiness for any future protracted conflict.

The East: Growing Cooperation Amid Strategic Complexity

Meanwhile, recent years have witnessed expanding political and economic cooperation among Iran, Russia, and China, alongside varying forms of engagement with North Korea.

Analysts caution, however, that these relationships should not necessarily be viewed as a formal military alliance. Rather, they reflect converging strategic interests in selected economic, diplomatic, and security domains, particularly in response to Western sanctions.

Sanctions have also encouraged several of these countries to expand trade using national currencies while deepening cooperation in energy, infrastructure, advanced technology, and financial systems.

Economics and Technology: The New Strategic Battleground

Many experts argue that today’s competition between East and West extends well beyond conventional military power.

Artificial intelligence, semiconductor manufacturing, critical minerals, supply-chain resilience, cybersecurity, and technological innovation have emerged as central pillars shaping the future global balance of power.

While the United States and its allies seek to preserve their technological leadership, China and its partners continue investing heavily in indigenous innovation and reducing dependence on Western technologies.

Is There Any Winner?

Most economists agree that a major military confrontation in the Gulf would impose significant costs on all parties, albeit unevenly.

Higher oil prices could generate short-term gains for some energy exporters, yet they would simultaneously weigh on global growth, dampen investment, and increase inflationary pressures across major economies.

Financial markets could also experience heightened volatility as investors seek safe-haven assets amid growing geopolitical uncertainty.

Conclusion

Current economic and geopolitical indicators suggest that any large-scale military confrontation with Iran would carry risks extending far beyond the battlefield itself.

The central strategic question is therefore not merely which side possesses greater military capabilities, but which can sustain the economic, political, and strategic costs of a prolonged conflict.

At a time when the international system is undergoing profound transformation—and when competition over technology, energy, industrial capacity, and economic resilience is intensifying—many analysts argue that effective crisis management and de-escalation may ultimately prove far less costly than testing the limits of military power in one of the world’s most strategically sensitive regions.

Reference:

• U.S. Energy Information Administration (EIA) – World Oil Transit Chokepoints.
• International Energy Agency (IEA) – Oil Market Report.
• Congressional Research Service (CRS) – War Powers Resolution.
• Brown University – Costs of War Project.
• International Monetary Fund (IMF) – World Economic Outlook.
• Stockholm International Peace Research Institute (SIPRI) – Military Expenditure Database.
• International Institute for Strategic Studies (IISS) – The Military Balance.
• NATO – Defence Expenditure of NATO Countries.
• World Bank – Global Economic Prospects.
• OECD – Economic Outlook