The REAL Economic Costs of War with Iran
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If tensions escalate with Iran, what happens? Your gas and oil might get way more expensive. The world's most strategically important waterways, the Strait of Hormuz, it's partially controlled by Iran. And maybe you're thinking, who cares? I don't even have a car. This won't affect me. Wrong. If oil and gas prices go up, the price of everything is going up.

What's up, rich friends? Welcome back to another episode of Net Worth and Chill. I'm your host, Vivian Tu, aka Your Rich BFF, and your favorite Wall Street girly. If you've watched the news or been on the internet in the past week, you've probably heard the words war and Middle East all over. I think it's pretty obvious that the impetus for this episode was the fact that we were once again getting into a dicey position with military intervention with the Middle East. However, we're not going to be doing that today.

I want to say that this is an episode that really applies to any past war or any future wars that may occur because the financials and the ways that you can still be smart with your money are going to stay the same. Last weekend, the U.S. launched targeted strikes at three Iranian nuclear development sites at Fordow, Natanz, and Isfahan.

As of this recording, there is now a shaky ceasefire and high-level political leaders are trying to come up with diplomatic solutions. But here's what nobody's breaking down for you, the real cost of these operations and what they mean for your wallet. Also, since today's episode is very news and headline heavy, I want to make sure that you know the date in which this is being recorded, so it's time-stamped. Today is Friday, June 27th, so any information that comes out

after today won't be included in this episode, unfortunately, but I just want to make sure that you know that so you have a full picture of what's going on. Here's a quick recap of what's been going on and where we're at now. On June 22nd, 2025, US B-2 bombers targeted three Iranian nuclear facilities. On June 23rd, 2025, Iran retaliated against the US bases in Qatar and Iraq. Currently, there is a 10th ceasefire with potential for escalation.

Both Israel and Iran have said they'll respect the ceasefire if the other does. It's kind of like when you and your little brother were poking each other in the back of the family minivan and you said you would stop when he stopped, but then we didn't know if anybody was actually going to stop. With the rising tensions and U.S. military intervention in the Middle East, people are now more than ever concerned about war and if the ceasefire will even hold.

Now, I'm not here to debate foreign policy or play armchair general. That's not my lane. And frankly, there are way smarter people than me making those calls. But what I am here for is to break down exactly how geopolitical tensions translate into dollars and cents and what it means for you and for America's economic outlook. So let's get into it.

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The biggest question on everyone's mind is if tensions escalate with Iran, then what happens? The biggest and most likely economic impact we could see if these tensions continue to escalate are increased oil and gas prices, because it wouldn't be a U.S. intervention in the Middle East without the word oil.

But why could the US bombing Iran cause an increase in oil and gas prices? Because of the Strait of Hormuz. The Strait of Hormuz is a 21-mile-wide chokepoint controlling access to the Persian Gulf and one of the world's most strategically important waterways for global energy supplies.

It's partially controlled by Iran. It's essentially the most important oil highway in the world with the U.S. Energy and Forbation Administration finding that a quarter of the world's oil and 20% of the world's natural gas all pass through the strait. In 2024, Reuters found that average daily exports stood at 20.3 million barrels of crude oil passing through the strait

Since roughly 20% of global oil has to move through this waterway, any blockade would trigger worldwide energy price spikes which would literally affect everything. So what does this mean for you? Your gas and oil might get way more expensive. And maybe you're thinking, who cares? I don't even have a car. This won't affect me. Wrong.

You know what else depends on oil and gas? Planes, trains, cars, buses, and so much more. Were you looking forward to traveling this upcoming holiday season for Thanksgiving or Christmas? Forget about that. With increased oil prices, fuel for planes, trains, and even cruises are going to get more expensive too, which means you can expect those ticket prices to go up as well. Here's something else to consider too.

AI is now the greatest thing since sliced bread and everyone is using it. AI requires a pretty significant amount of electricity to power it. So where does some of that electricity come from? Fossil fuels, aka oil and gas.

And where does oil have to pass through? The Strait of Hormuz. Or let's take hospitals, for instance. A lot of hospital backup generator systems are dependent on diesel fuel. Ultimately, oil powers almost everything. We literally use about 20 million barrels of oil daily in this country alone, according to the U.S. Energy Information Administration. And that doesn't include any of our other global counterparts—

And we know how much of a global economy we have because we're consuming things that are made in other countries as well. So if oil and gas prices go up, the price of everything is going up. If tensions are to escalate, we could be facing some serious risk to the oil and gas industry that will affect much more than just your gas prices. Now, on to the question of if we do go to war, how much will it cost? Well, let's look at history.

Aside from being destructive and harmful to civilians and decimating populations, the one thing we can guarantee every single war to be is seriously expensive. It's at this point in the episode where I feel it's important to remind you that according to the Department of the Treasury, the U.S. is currently...

$36.1 trillion in debt already. The US government is in fact the brokest bitch you know. So keep that number in your head as we go through these facts and figures. When it comes to paying for war, we usually do one of four things. One, surprise, surprise, increase taxes. Two, we can reduce non-military spending to pay for military expenses.

Three, the government borrows from the public through issuance of war bonds or issuance of U.S. Treasury securities, so AKA more debt. And four, money creation. Basically, we just print more money, but we all know what that ends up leading to, inflation. So let's look at some historical spending on war and what our most recent intervention in Iran might have cost.

According to Brown University's Watson Institute for International and Public Affairs, the U.S. committed over $2.89 trillion to its military engagements in Iraq and Syria during the 20-year span from 2003 to 2023. And this number doesn't even account for future obligations for veterans' care. Additionally, Brown University also found that between 2001 and 2019, the U.S. spent over $2 trillion on the war in Afghanistan.

Again, I do in fact keep saying trillion with a T.

This is some really costly spending here. Just looking at recent military action, the U.S. mission to bomb the Iranian nuclear enrichment facilities used B-2 stealth bombers valued at about $2.1 billion each. And sure, they weren't made for this purpose and they'll probably be used again, but that's still a ton of money and bunker buster bombs worth millions. So this was a pretty costly intervention to say the least.

While I don't have a crystal ball and I can't give you an exact number of how much this will cost us if we were to have further intervention in Iran, it's fair to assume if tensions were to escalate, we would be spending a pretty penny. You might be thinking, okay, yes, war is expensive, but Vivian, isn't war good for the economy?

Contrary to what you might have been taught or what you might have heard on social media, not all wars are going to benefit the economy. Short-term economic effects often do include increased government spending on defense, which can stimulate certain sectors like manufacturing and technology. This can help boost employment in some of these defense-related industries. World War II is a great example of this, as it helped pull us out of the Great Depression.

But the longer-term effects of war can be more negative. The Iraq and Afghanistan wars cost trillions of dollars, funded largely through borrowing that increased national debt. And as I said previously in this episode, we currently have a lot of debt. I cannot stress this enough. Resources diverted to military spending all have an opportunity cost.

That is money that could have gone to infrastructure, education, health care, or other productive investments that could have generated better long-term economic returns. We need to ask the question, what is the ROI, return on investment? The broader economic disruption depends on the war's scope.

Large conflicts constrain supply chains, increase commodity prices, like we mentioned, oil, and create market uncertainty that affects investment and consumer confidence. Essentially, the takeaway here is that wars can help stimulate the economy and defense-related industries, but peaceful economic development generally offers better prospects for sustained, that's important, sustained economic prosperity in the long run.

So don't plan on a war to get us out of any homegrown financial issues. Now, outside of the risk of war and further military action, just at a baseline, the U.S. spends a lot, like a lot, a lot on its military.

And we can probably assume that increased military tensions translate into even more defense spending. So what else could that money do? And listen, defense spending has made us the world's superpower. I don't deny that. But it's important to understand that there are other things that some of that money could have gone towards.

This isn't to say we should stop spending on defense entirely because we shouldn't, but it's helpful to understand the real numbers behind the U.S. military. The U.S. spends close to $1 trillion, yes, $1 trillion with a T, dollars per year.

which is more than what the next nine countries spend on defense combined, according to the Peter G. Peterson Foundation. The budget that flows annually through defense spending could alternatively fund transformative domestic investments to help improve our lives as people who actually live in the U.S.,

The same amount could build miles of new highways, construct bridges, fundamentally upgrading America's crumbling infrastructure. I mean, the American Society of Civil Engineers gives U.S. infrastructure a C-grade, so we could certainly use an upgrade here.

In terms of education, the Wharton School of Business estimates that just a fraction of this funding, $351 billion, could provide universal pre-K programs for children for the next 10 years, creating long-term economic benefits through improved educational outcomes. Efforts to reverse climate change could receive the massive funding needed for the renewable energy transition, according to research conducted by Wood-McKenzie.

Or we could actually provide meaningful and expanded support to our veterans and their families rather than slashing veterans' benefits. I'm looking at you, Big Beautiful Bill. But seriously, Brown University estimates that to support veterans from post-9/11 wars, it'll cost us between $2.2 and $2.5 billion by 2050.

And let me be clear, we should be supporting our veterans. This isn't to say we should stop spending on defense itself. I just want to illustrate how much money we are spending on defense and how more military action means we'll have to continue to spend more as a nation. And let's be real, that seems these days to be the only thing we're good at. Spending, spending, spending. But as your rich BFF and your favorite Wall Street girly, I got to remind you,

saving, investing, and preparing for our nation's future is also equally as important. Now, moving into the Q&A portion of today, I asked you guys for some of your questions on war and how increased actions between the U.S. and Iran could translate into actual dollars in or out of your wallet for both you and for the U.S. as a whole.

Hundreds of people sent in questions, and while I'm going to try to get to as many as possible, we obviously don't have time for all of them. But for folks who are looking for more financial information from understanding the aspects of war to knowing what they should be investing in, check out my new tech platform. It's called AskDolly.com, A-S-K-D-O-L-L-Y.com.

We're currently getting people on our wait list for beta testing. Ask Dolly is a better AI tool to help you with your finances. Plus, it's different than all of the other AI tools because you will be assigned a live human certified financial planner who can help make sure that the information is catered to you and you can get the information you need.

And you will be scraping from reputable data so you don't have to be sifting through hours and hours of different search results and not even sure what actually makes sense. So head to AskDolly.com to sign up. And now let's get into the Q&A section. This message is brought to you by Abercrombie & Fitch. I've been ready for summer for a while, and now it's finally time for summer outfits. With the trip coming up, the A&F Vacation Shop has me covered.

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Starting with a tough one. Okay, so I think in part, we as a society and we as humans have a stronger negative emotional reaction to bad things happening versus a positive emotional reaction to good things happening. We are biologically motivated by fear.

But the idea of incremental benefit doesn't necessarily act as a strong driver for change or motion, right? So think about it. Money put towards defense is in theory protecting us from being attacked, keeping us safe from harm, and helping us avoid a negative thing.

However, putting money towards public and social services helps to improve educational outcomes, provides resources to our lesser advantaged, and helps us to improve upon the existing status quo. One of these is a very strong motivator, and the other for many people and many lawmakers is not. I'm not saying it's right, but from a psychological perspective,

The idea of a major city being attacked or bombed or harmed is a much stronger motivator than the idea of a few school kids getting a free lunch or having slightly better VA benefits or even having community centers that can help provide care and resources.

It's not fair. It's not great. Okay, on to question number two. What should we do in this scenario? Keep cash? Buy gold stocks? Is that a thing? So when it comes to periods of financial uncertainty, I think it's really important that we all adopt a defensive financial strategy.

First and foremost, continue investing. Try to continue putting money into your investment accounts. Keep buying investments that are diversified, that track the broader market. Don't pull your money all at once when you get scared because you'll lock in any sort of losses.

But I do encourage you to make sure you have a bigger emergency fund on hand. Normally, I recommend three to six months of living expenses put into a high-yield savings account. However, during times like this, if you can get closer to six to 12 months, that puts you in a stronger position. I wouldn't necessarily say change anything drastically from your financial situation. However, it's just an important time to be a little bit more wary, a little bit more cautious,

I wouldn't necessarily make any monstrous purchases or big life changes when there is this much economic uncertainty. Okay, next up, question five.

Who profits? Especially what are sectors or places we wouldn't think are connected? So let's state the obvious. Our good friends at Lockheed Martin, Raytheon, Boeing, Northrop Grumman and other defense contractors will profit as expected. In the roughly $14 trillion that the U.S. spent on wars in Afghanistan, Brown University estimated that one third to one half of that money went to defense contractors.

I mean, just in 2020, Lockheed Martin received $75 billion in government contracts. The usual suspects are the ones to largely profit. However, anyone or any company specifically could receive a government contract. So, for example, sometimes...

packaged food manufacturers are producing food to be shipped out to the armed forces. They can see increased profits from government contracts or even people who may be creating uniforms. So clothing retailers that create those uniforms, they could be seeing increased government contracts. Even the vehicle manufacturers, transportation, things like that. But essentially, if it can be given a government contract to produce

transport soldiers, be used for intelligence necessary for these folks to be doing their jobs.

you could get a government contract and profit from war. Next question up, where does the government get the funds when we are already trillions in deficit? I'm glad this person was already stealing from my crib sheet of, hey guys, we have a lot of debt. But like I mentioned earlier, there are four main ways that we are getting the funds for war. One, increasing taxes. This isn't great for most of us at home because we probably already feel like we pay a lot in taxes.

Two, the reduction in non-military spending to pay for military expenses. Again, not great for average everyday people because these are likely benefits that you may enjoy. Things like community resources or national parks or even just maintenance of our highways. Like you're probably going to drive into a pothole. So, you know, we'll reduce non-military spending to pay for these military expenditures and

Three, you've got government borrowing. They really said, we don't have enough debt. Let's take on more. People are actually surprised to find that largely the U.S. government is in debt to us, the people, because the government will borrow from the public through war bonds or issuance of U.S. treasuries. So, again, a lot of this money is us borrowing.

funding our government. And, you know, they're also getting money from foreign allies, which are buying our debt. But we have to remember, this isn't just a gift. This isn't, you know, an interest-free loan. Like, we have to then pay interest on that debt, which can in the future become a financial burden, which it is currently becoming. And last but not least,

Money creation, basically just printing more money. But again, like I mentioned, this does have, you know, side effects, negative outcomes that could potentially then impact the financial future of your children. And unfortunately, oftentimes when it comes to large expenses like war,

We are borrowing from our kids. We will be spending money today that our kids pay for in the future. Next question, how does this impact mortgage rates? So less to do specifically with like any sort of war, but more to do with the interesting position we're in right now because of the economic uncertainty. Listen, while it's below the initial expectations, it's

Right now, we are still at the highest level of tariffs the U.S. has had in nearly nine decades. And if they stay like this, they're going to have an impact on the U.S. and global economy. Tariff hikes typically simultaneously increase the probability of an economic slowdown while causing prices to typically move upwards. So economy slows down, prices move upwards. And as a result...

Interest rates will likely stay higher for longer because Fed Daddy Jerome Powell will be hesitant to lower rates aggressively because he wants to avoid any sort of runaway inflation. Right now, we have inflation relatively under control, but you guys remember when it was 8%, 9%? Things were crazy.

So this is all to say mortgage rates, which are based off of the Fed funds rate that the Fed sets, they may stay higher. They're determined in relation to that number when the Fed sets rates. That is the cost of borrowing in between banks and then other sort of lending between banks and you. So car loans, mortgage loans, etc.

personal loans, student loans, all of that is based off of that number. And you typically pay a little bit more than what that rate is set by the Fed. So mortgage rates might stay a little bit higher for a little bit longer.

Next question. Please tell us how much it costs to drop these bombs and equate to Doge cuts. Doge claimed they were able to save the government about $160 billion, but that's debatable as nonpartisan research groups have found that Doge could actually be costing taxpayers $135 billion.

So just one B-2 stealth bomber costs about 2.1 billion to create, and we utilized seven of them. Listen, these B-2 fighter planes,

aren't only used for this one mission. So I don't want to necessarily equate it as like, we made these planes for this moment. But Doge basically didn't do that much in terms of our country's bottom line. The savings that they were able to squeeze out actually likely...

were eaten up by all of the incremental charges that they ran into. So I would just say that I feel like Doge was a very poorly executed exercise with a bad mission statement, a bad thesis, and even worse, you know, actual implementation. All right, next question. Are my savings safe in times of war or can the country just take money from us to cover the cost of it?

So the government can't directly take or freeze your assets just willy-nilly. They can't just show up at your bank and be like, money, please. There are instances when your bank accounts can be frozen, but typically you have to commit a financial crime and there has to be an investigation. But what the government can do, however, is increase taxes, which means more money from you to the government to help them cover the costs of increased military spending during times of war or uncertainty, etc.

War can also increase inflation, so your money, if not properly invested, would lose purchasing power over time. So yes, your dollar could feel like it's shriveling up and worthless, or there might just be fewer dollars in your bank account because you're paying more in taxes, but it isn't like all of a sudden they're allowed to just commandeer your cash. Why?

While I certainly hope this ceasefire holds as geopolitical tensions rise, it's important to examine the money behind the actions and how it could affect you at home.

In any scenario, being prepared is the most successful way to navigate both political and economic twists and turns. I hope you found this episode helpful and maybe even learned a thing or two. And I will leave you with a song lyric from the wise Edwin Starr, War, what is it good for? Absolutely nothing. See you next week.

Thanks for tuning into this week's episode of Net Worth and Chill, part of the Vox Media Podcast Network. If you liked the episode, make sure to leave a rating and review and subscribe so you never miss an episode. Got a burning financial question that you want covered in a future episode? Write to us via podcast at yourrichbff.com. Follow Net Worth and Chill Pod on Instagram to stay up to date on all podcast related news. And you can follow me at yourrichbff for even more financial know-how. See you next week.