Why the U.S. Cannot Afford This War:

The Economic Abyss Beneath the Rhetoric

By Farhad Omar | June 2025

In Washington, the calls for intervention are growing louder. Prominent senators, led by figures like Ted Cruz, are demanding decisive American support for Israel in its intensifying conflict with Iran. Phrases like "strategic deterrence" and "defending allies" dominate the cable news cycle. Yet beyond the soundbites and slogans, there lies a deeper, more sobering reality. The United States, despite its formidable military posture, is economically ill-positioned to sustain another prolonged conflict. It is not a strategy that restrains Washington. It is solvency.

The U.S. national debt now exceeds $35 trillion, reaching levels not seen since the aftermath of World War II (U.S. Treasury, 2025). As a percentage of GDP, the debt has ballooned past 125 per cent. Servicing that debt consumes nearly $1 trillion annually, even before the costs of war are factored in. This is not just a budgetary problem. It is a strategic liability. War, by its nature, demands escalation. Yet escalation in this context could push the American economy toward a tipping point that no military victory could offset.

The last time the United States undertook a sustained military campaign in the Middle East, the wars in Iraq and Afghanistan cost over $6 trillion cumulatively (Brown University, 2021). Those conflicts were funded largely through debt. But today’s economic environment is starkly different. In the early 2000s, the U.S. dollar was unchallenged. Treasury yields were low, inflation was stable, and global confidence in U.S. fiscal management remained high. None of those conditions hold in 2025.

As of mid-June 2025, the 10-year Treasury yield has hovered around 4.4 per cent. This signals growing investor unease with America's fiscal trajectory. Markets are not blind. They see the political dysfunction that led to multiple debt ceiling crises, the credit downgrades issued by Fitch and Moody’s, and the ballooning interest payments on federal obligations. When political hawks call for war without considering its cost, they are gambling with borrowed time and borrowed money.

Further military engagement with Iran would require massive appropriations. Even a limited air campaign could cost tens of billions of dollars per year. A full-scale regional conflict would likely necessitate spending on the order of hundreds of billions. Unlike previous wars, there is no budgetary headroom. Every dollar spent would either add to the debt or divert from already strained domestic priorities, including healthcare, education, and infrastructure.

And then there is inflation. Though the Federal Reserve has fought hard to rein in the price surges of 2022 and 2023, a sudden spike in oil prices—likely in the event of a regional war—would undo much of that progress. Iran sits adjacent to the Strait of Hormuz, through which nearly 20 per cent of the global oil supply transits. If Iran were to close or disrupt the strait in retaliation for U.S. or Israeli attacks, oil prices could surge well above $150 per barrel. Economists at JPMorgan Chase and Goldman Sachs have already modelled this outcome in their worst-case forecasts (Goldman Sachs, 2025).

Higher oil prices would trigger a domino effect. Transportation costs would rise. Food prices would follow. Interest rates, already tight, might need to increase further, choking credit and investment. For American households still recovering from years of economic volatility, this would be a devastating blow. For the Federal Reserve, it would be a policy nightmare—caught between controlling inflation and avoiding recession.

Beyond the domestic economy, the geopolitical costs of war are equally dire. As outlined in "Sabotaging the Silk," this conflict may not only be about nuclear fears or ideological rivalry. It may also be about disrupting infrastructure like the International North-South Transport Corridor (INSTC), a BRICS-backed trade route that challenges Western-controlled maritime logistics. If the United States is seen as complicit in the effort to sabotage this corridor, it will accelerate the very trend it seeks to prevent: de-dollarisation.

Countries across the Global South are already shifting away from the dollar. Russia and Iran now conduct most of their bilateral trade in rubles and rials. China has increased yuan settlements through its Cross-Border Interbank Payment System (CIPS), and nations in the Association of Southeast Asian Nations (ASEAN) have ramped up local-currency swaps. The BRICS bloc is finalising a shared digital payments platform designed to bypass SWIFT and facilitate non-dollar trade (Reuters, 2025).

If the United States becomes further embroiled in this conflict, it risks being viewed not as a guarantor of global stability but as a saboteur of alternative economic systems. That perception matters. It informs the investment decisions of sovereign wealth funds, the reserve strategies of central banks, and the trade policies of emerging economies. A war justified in the name of security could end up undermining the very financial foundations that uphold American global leadership.

History offers cautionary parallels. In 1956, Britain and France attempted to retake the Suez Canal through military force. They succeeded militarily but failed strategically. The U.S., under President Eisenhower, refused to support the campaign. Within months, the pound sterling collapsed, and Britain’s role as a global hegemon diminished irreversibly. Today, the U.S. faces its own “Suez moment.” The difference is that the United States is not the bystander but the actor at risk of overreach.

Political proponents of intervention argue that the cost of inaction is greater. They warn of Iranian proxies, regional destabilisation, and threats to Israel. These concerns are valid. But the question is not whether threats exist. It is whether America can afford the means to counter them in the way it once did. The answer, increasingly, is no.

Domestic political will is also fragmented. Polling by the Pew Research Centre in May 2025 shows that only 28 per cent of Americans support a new military engagement in the Middle East. Among younger voters and independents, support drops to 15 per cent. Even within the Republican Party, isolationist factions have gained ground, pushing back against the neoconservative orthodoxy that dominated the early 2000s.

A prolonged war would exacerbate these divisions. As costs rise and objectives blur, public trust in institutions would erode further. That erosion is not abstract. It manifests in declining voter turnout, increased polarisation, and the rise of populist movements that question the legitimacy of America’s global role altogether.

Meanwhile, adversaries are watching. China, in particular, would benefit from a distracted and overextended United States. As Washington pours resources into another Middle Eastern conflict, Beijing could accelerate its own strategic projects—strengthening its presence in the South China Sea, deepening economic ties across Eurasia, and positioning the yuan as a stable alternative to the dollar in times of crisis.

This is the grand irony. In seeking to defend its global position through war, the United States may actually hasten its decline. Hegemony is not only about military power. It is about economic credibility, diplomatic trust, and the ability to inspire confidence. A nation that wages war on debt, against a backdrop of inflation and global transition, risks squandering all three.

In conclusion, the question facing American policymakers is not just one of capability but of prudence. Can the United States fight this war? Perhaps. But should it? That answer demands a reckoning with fiscal arithmetic, global sentiment, and the limits of empire. The dollar does not float on force alone. It floats on trust. And trust, once lost, is not easily regained.

References:

U.S. Department of the Treasury. (2025). National Debt Clock. Retrieved from https://fiscaldata.treasury.gov/

Brown University. (2021). Costs of War Project: U.S. Wars in Iraq and Afghanistan. Retrieved from https://watson.brown.edu/costsofwar/

Goldman Sachs. (2025). Global Oil Market Risk Forecast. Internal Memo cited in Financial Times, May 2025.

Pew Research Centre. (2025, May). American Public Opinion on Middle East Engagement. Retrieved from https://pewresearch.org/

Reuters. (2025). BRICS Nations to Launch Digital Currency Payment Platform. Retrieved from https://www.reuters.com/