War

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  By Guest Blogger Doug Rowat

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Back and forth we go.

When the Iran war broke out on February 28th, oil tanker traffic through the Strait of Hormuz naturally ground to a halt. Fast forward two months and the US and Iran are now simply taking turns declaring they have control over this critical oil-supply channel. Regardless of who ‘owns’ the Strait, the end result is that the US is still no closer to getting it reopened.

So, how does this resolve itself? There are two things that are always true of wars. One, their impact on civilians and soldiers alike is terrible. And two, they’re expensive.

The below table highlights the total cost of major conflicts involving the US over the past 100 years.

US war costs at a glance – past 100 years

Source: Congressional Research Service, Brown University Costs of War Report, US Treasury, Office of Management and Budget. *total cost includes such items as veteran care and disability, homeland security, interest on war borrowing, etc.

The eventual cost of the Iran war is obviously not yet known, but it currently stands at almost US$60 billion and in another few months will probably match the inflation-adjusted cost of the entire Gulf War. You can actually track the rising costs here: https://iran-cost-ticker.com/

Despite the endless posturing and the seemingly futile negotiations between the two sides, I believe the war will gradually wind down due to a combination of TACO concessions and, more importantly, cost.

Wars are funded through Congress and a funding roadblock is looming in November.

So far, the White House has declined to give Congress an estimate for the cost of the war, which tracks with Trump’s general lack of transparency regarding the entire conflict, but we do know that the White House has already asked for an additional US$200 billion in supplemental funding. The US$200 billion request is in addition to the Defense Department’s (sorry, War Department’s) annual budget of US$839 billion, which was approved by Congress in January.

The battle lines are being drawn. Republicans will argue that Congress has separately approved more than US$185 billion in funding for the Ukraine war, a war that is of importance to the Democrats, but the Democrats will counter that the Iran war is far less popular and more directly impacts the lives of Americans, hence the buck more per gallon that they’re paying at the pump.

Republicans might eke out support for at least some of the US$200 billion presently on the table, but it becomes impossible to ignore the looming US mid-term elections. To say that Trump and the Republicans are in trouble in November would be an understatement. The Republican majority in the House is razor thin and the evidence of history suggests that they’ll get crushed.

Since WW II, the president’s party loses an average of 26 House seats in the mid-terms. Layer on Trump’s abysmal 38% approval rating and skyrocketing gas prices, and no amount of red-state redistricting will likely save the Republicans.

And now the Senate is at risk as well. Not long ago it seemed a virtual lock that the Republicans would at least maintain their control here. But this too has changed. Here are the current Polymarket odds of the Democrats taking back the Senate. It’s a stunning reversal for the Republicans:

Republicans are almost certainly doomed in the House, but their odds of holding the Senate have also plunged

Source: Polymarket. As of April 21, 2016

So, we have the consistency of the TACO: Trump didn’t end Iran’s civilization, he hasn’t targeted power plants, bridges or other civilian infrastructure, and he’s extended the ceasefire despite insisting that he wouldn’t. It all signals a strong desire to end this self-inflicted quagmire.

But there’s also the money. And Republicans are going to run out of it. The November mid-terms almost certainly shut off the war-funding spigot.

Markets always look ahead and markets like it when wars end (or at least lose intensity). The S&P 500 is up almost 9% in the past month.

It’s signalling what many are already thinking: the war’s over.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

Source: https://www.greaterfool.ca/2026/04/25/war-6/