Executive Summary
A U.S. and Israeli conflict with Iran, initiated in February 2026, escalated into a regional war of attrition, marked by retaliatory strikes, Strait of Hormuz disruptions, and significant U.S. military expenditure. Despite a temporary ceasefire and MoU, renewed fighting and U.S. sanctions continue, with Iran's regime facing internal and external pressures. The conflict has revealed U.S. munitions shortfalls and strained naval logistics, while regional actors like Hezbollah and Houthi forces remain involved.
Why It Matters
This document provides a detailed, forward-looking assessment of a hypothetical U.S.-Iran conflict, offering critical insights into potential military, economic, and political ramifications for the Middle East and global security.
Key Takeaways
- The hypothetical U.S.-Iran conflict has resulted in significant U.S. military costs ($38 billion by August 2026) and revealed critical munitions inventory shortfalls and industrial base bottlenecks.
Source evidence · PDF page 2
The Congressional Budget Office (CBO) estimated in September 2026 that U.S. military operations have cost $38 billion as of August 1, 2026. A September 2026 Lead Inspector General report relayed a Pentagon assessment that U.S. forces’ munitions expenditure “has resulted in strategic inventory shortfalls and revealed industrial base bottlenecks for munition resupply.”
- The conflict has evolved into a war of attrition, with both the U.S. and Iran facing limitations in sustaining operations and bearing associated costs.
Source evidence · PDF page 5
As of September 2026, the conflict appears to have become a war of attrition. On one hand, Iran may have limited abilities to continue attacks and appears to face an increasingly perilous economic situation. On the other, the United States and its partners in the Gulf and Israel may have finite capacity to counter Iranian attacks and bear associated military, social, economic, and political costs.
- The potential fall of the Iranian government, while a U.S. objective, could lead to broader regional dysfunction, including the collapse of central authority and proliferation risks, rather than a stable, pro-U.S. outcome.
Source evidence · PDF page 18
The fall of the current government could result in broader dysfunction, to include the collapse of central authority in Iran. Under such a scenario, whether or not the Islamic Republic continues its nominal rule, neither it nor another entity would be capable in the short term of extending its writ across the country.
Strategic Relevance
This report outlines a plausible future conflict scenario between the U.S. and Iran, detailing military objectives, economic impacts, regional proxy involvement, and potential outcomes. It highlights the strategic challenges of prolonged engagement, resource depletion, and the complex implications of regime change.