An all-out U.S. war with Iran, including an invasion by American troops, would cost the global economy close to $2 trillion in the first three months and could go as high as $3 trillion, according to a Washington think tank.
A full-scale ground operation to dismantle Iran’s nuclear program is unlikely but the scenario is just one of a handful that a group of nine experts, assembled by the Federation of American Scientists, examined to explore how the global economy would be impacted by U.S. action against Iran.
“There had been talks about oil spikes, about what would happen with the Iranian nuclear program, damage to Iran itself but there had been no, at least in the open sources, large-scale looks at what was going to happen globally,” said Charles Blair who co-authored the report.
Here is the group’s breakdown on various scenarios:
Note that all costs are median estimates for the first three months of any action. Costs projected longer than that involved too many variables, according to the group, and would be inaccurate to report.
The U.S. increases the financial pressure on Iran by imposing a new round of sanctions that penalizes any foreign bank that does business with any Iranian bank. Current sanctions only apply to large transactions related to Iran’s energy sector. The sanctions would “seek to cleave Iran’s entire energy sector from the world economy,” according to the report. The new round of sanctions would also limit international lending, depleting Iran’s foreign currency reserves.
Estimated Global Cost: $64 billion
Even though Iran’s economy is severely hurt by sanctions, a diplomatic agreement is not on the horizon. The United States aims to “cut off” Iran by blocking all of its oil, natural gas, energy equipment and services. A substantial amount of U.S. military assets are deployed to the Persian Gulf to enforce the shipping blockade. A worldwide ban is imposed on investments in Iran’s energy sector. International lending to Iran and investment in Iranian bonds are also banned.
Estimated Global Cost: $325 billion
The United States leads a limited air and special forces campaign, targeting Iran’s nuclear facilities and military installations that are of some concern. In order to avoid escalation to a larger conflict the United States relies on the stealth and speed of this mission, not targeting Iranian military assets that could counter the strikes. U.S. forces run the risk of being targets.
Estimated Global Cost: $713 billion
The United States leads a larger scale air campaign that targets Iran’s nuclear facilities and its military to limit chances of Iranian forces being able to retaliate. Iranian air defenses, radar and aerial command and control facilities are bombed.
Estimated Global Cost: $1 trillion
U.S. troops invade Iran. A naval blockade and “no-fly” zone are imposed as U.S. forces systematically take down Iran’s military bases, destroying each installation one by one. Large numbers of ground troops would be needed for this mission
Estimated Global Cost: $1.7 trillion
The United States makes concessions to resolve the conflict over Iran’s nuclear program. Sanctions are temporarily suspended and America scales back its military presence in the Persian Gulf, redeploying an aircraft carrier to another area. Oil prices around the world drop, investments increase in the region and markets react positively now that the threat of a conflict is diminished.
Estimated Global Gain: $60 billion
Not addressed by the group on Thursday were the current U.S. and international sanctions against Iran that target the country’s oil by cutting off the U.S. financial system from any entity that facilitates the purchase of Iranian oil through the Central Bank of Iran. The European Union also has an embargo on the purchase of Iranian petroleum. Combined the sanctions are crippling Iran’s economy and has caused Iran’s currency, the rial, to plummet to historic lows.