So here's the thing about wars: they're expensive. And when economists start doing the math on potential conflicts, the numbers can get pretty eye-watering. That's exactly what's happening as tensions with Iran escalate, with prominent voices warning about everything from trillion-dollar price tags to supply chain meltdowns.

Let's start with the inflation hawks. Economist Peter Schiff took to social media to warn that a prolonged conflict could have massive economic consequences. "Trump committed Americans to pay billions to defeat Iran, then billions more to rebuild what we destroy," Schiff wrote. "The cost will likely be measured in the hundreds of billions and could top $1 trillion, causing already rising inflation to skyrocket."

Now, you might think rising energy costs would be the main inflation driver in this scenario. But Schiff argues it's more about how we pay for things. "The inflation comes from all the money the Fed will create to fund all the debt the Treasury will issue to pay for the war," he explained. When asked if this situation might push investors toward safe-haven assets like gold, his response was simple: "Of course."

This comes at a time when inflation had actually been cooling. Price pressures in the U.S. eased at the start of 2026, with annual consumer inflation slowing to 2.4% in January from 2.7% in December. That marked the lowest level since May 2025 and came in below economists' expectations of 2.5%. So we're talking about potentially reversing a positive trend.

Meanwhile, other economists are crunching more specific numbers. Kent Smetters, director of the Penn Wharton Budget Model, estimated last week that the U.S. military campaign against Iran—codenamed Operation Epic Fury—could cost American taxpayers between $40 billion and $210 billion. The minimum direct budgetary cost sits at $40 billion, potentially rising to $95 billion, with a more likely figure around $65 billion covering military operations and equipment replacement. And here's the kicker: the total could climb even higher if the conflict lasts longer than two months.

But it's not just about the direct costs. Economist Mohamed El‑Erian is warning about broader economic disruptions if the conflict spreads. "The longer this war lasts and the more it spreads, the greater the risk that the global economy may face a simple yet impactful reality once again," he wrote. "Some production systems and certain cross-border supply chains do not handle 'sudden stops' well."

Think about it this way: modern supply chains are optimized for efficiency, not resilience. They're built on just-in-time delivery and complex international networks. When something disrupts that flow—like, say, a major conflict in a critical shipping lane—the whole system can seize up. And we've seen how that plays out during the pandemic.

Speaking of critical shipping lanes, the Strait of Hormuz is getting a lot of attention right now. This narrow waterway typically carries about 20% of the world's oil and natural gas shipments. With parts of the route effectively shut and drone attacks targeting energy facilities, several oil-producing countries including Iraq and Kuwait have reportedly curtailed production.

The result? Oil prices surged above $90 per barrel on Friday, marking a more than 30% weekly increase. And in a telling market signal, energy stocks were the only sector in the S&P 500 to finish the week higher. Everyone else was looking at the potential downside.

So what we're looking at here is a classic geopolitical-economic feedback loop. Conflict disrupts oil flows, which pushes up prices, which threatens inflation, which could force central banks to respond, all while governments are borrowing more to fund military operations. It's the kind of scenario that keeps economists up at night and has investors eyeing both energy stocks and safe havens.

The real question now is how this plays out. Do we get a quick resolution that limits the economic damage? Or does this become the kind of prolonged conflict that starts hitting those trillion-dollar estimates and triggering those supply chain "sudden stops"? For now, the markets are pricing in the risk, and economists are doing the math on just how expensive things could get.