• Trump rejected a seven-day ceasefire proposal and warned strikes could resume after November midterms if Tehran doesn't comply.
  • U.S. military has used more than 1,200 Patriot interceptors; CBO estimates Pentagon costs at $38 billion through August 1.
  • RTX (RTX) and Lockheed Martin (LMT) are expanding Patriot and THAAD production, but existing inventory shortfalls will take years to reverse.

Fragile Prospects

President Donald Trump has told advisers that the United States could ramp up bombing of Iran after the November midterms if Tehran does not accept Washington's terms, according to people familiar with the matter. The warning follows Trump's rejection of an Iranian proposal for a seven-day ceasefire and reopening of the Strait of Hormuz, which he judged insufficient.

U.S. Ambassador Mike Waltz disputed the characterization that domestic politics drives the decision, saying all options remain open. The administration's approach combines military strikes, naval pressure around Hormuz, and intensified sanctions. An August campaign dubbed "Economic D-Day" and "Operation Economic Outcast" added sanctions designations, targeted additional sectors, and suspended some licenses related to remittances, exchanges, and educational activity.

The Interceptor Problem

The central military constraint is air and missile defense. The U.S. military has fired more than 1,200 Patriot interceptors, and the Department of Defense has assessed that munitions use has created "strategic inventory shortfalls" and exposed industrial-base resupply bottlenecks. The Congressional Research Service estimates the United States likely used one-half to two-thirds of inventory in certain interceptor categories -- Patriot, THAAD, SM-3, and SM-6 -- since June 2025.

The cost of even successful defensive engagements is staggering. CBO estimates a Patriot or SM-6 interceptor at roughly $4 million, a THAAD interceptor at around $12 million, and a sophisticated SM-3 at approximately $28 million. Replacing expended munitions represents an estimated $21.7 billion, including $13.1 billion for missile-defense interceptors, $7.3 billion for land-attack cruise missiles, and $1.2 billion for other munitions.

Industry Ramps Up

RTX, Lockheed Martin, and their suppliers are moving to expand production. Raytheon (RTX) said several munitions lines are intended to reach 2 to 4 times prior production rates. Lockheed Martin targets increasing annual Patriot-interceptor output from 600 to 2,000, while THAAD output is slated to rise from 96 to 400.

RTX reported Q2 2026 sales of $24.7 billion, up 14% year over year, with Raytheon sales at $8.27 billion, up 18%. The company raised 2026 adjusted-sales guidance to $95 billion to $96 billion and reported a $289 billion backlog, including $119 billion in defense. Lockheed Martin posted Q2 sales of $20.1 billion, up from $18.2 billion a year earlier, and its backlog reached a record $230 billion. It raised 2026 sales guidance to $79.75 billion to $81.75 billion.

The Pentagon's framework agreements also involve Northrop Grumman (NOC), which provides solid rocket motors, Boeing (BA), which supplies PAC-3 seekers, and L3Harris (LHX), which makes THAAD rocket motors and control systems. The industrial strategy is to work directly with key sub-tier suppliers on tooling, facilities, and workforce expansion, reducing dependence on a small number of bottlenecked production lines. Even so, the ramp-up will take years.

Costs and Inflation

The war has cost the United States more than $25 billion, according to earlier estimates, but the more recent CBO figure places Defense Department costs at about $38 billion through August 1. Subsequent Pentagon-reported estimates cited by press reports put the cost at $43.6 billion through September 3. These figures use different dates and accounting methods, so they should not be added together.

The broader economic risk runs through the Strait of Hormuz and Red Sea shipping. CBO says reduced oil and gas shipments and disrupted refining have lifted crude, gasoline, diesel, and jet-fuel prices. It estimates the conflict added 2.3 percentage points to the annualized overall PCE inflation rate in Q2 2026, contributing to a 5.3% quarterly annualized reading. Its forecast for year-over-year PCE inflation in Q1 2027 is now 0.5 percentage points higher than projected in February.

Oil-price volatility illustrates the exposure: Brent futures stood at $60.85 per barrel on January 1, $118.35 on March 31, $71.57 on July 1, and $107.63 on September 10. These swings affect consumers directly through fuel and indirectly through transport and goods prices.

Readiness Tradeoff

Rebuilding interceptor inventories would probably take at least five years even if production rises, according to CBO. That creates a readiness tradeoff for other contingencies, particularly one involving large missile inventories such as a Taiwan conflict. Ukraine, Indo-Pacific allies, and U.S. commands outside the Middle East face potential competition for Patriot and other scarce interceptors.

The conflict remains an attritional war rather than a settled ceasefire. CRS says the April ceasefire and June memorandum of understanding collapsed, the arrangement formally expired in August, and the sides returned to limited strikes and a broader sanctions campaign in September. The administration sought $87.6 billion in supplemental appropriations in June, of which $67.1 billion was for the Pentagon; the portion apparently directly related to the conflict, $42.3 billion, was about 10% above CBO's estimated DoD costs at the time.

Congress is positioned to debate supplemental defense appropriations, limits or authorizations for military force, arms sales, sanctions, and oversight of any settlement. A negotiated settlement could reopen maritime trade routes, lower energy risk premiums, and reduce the immediate interceptor burn rate, but would depend on credible verification and enforcement around Iranian nuclear, missile, and maritime activities. Previous agreements have already broken down.

Casualties and Political Pressure

CRS reports 18 U.S. deaths and 824 wounded as of September 15, as well as substantial reported Iranian casualties and civilian harm. Public and political debate centers on whether escalation can coerce a durable nuclear and maritime-security agreement, whether the cost and humanitarian burden are proportionate, and whether a war that is contributing to inflation and readiness shortfalls should be intensified near an election.

The most defensible near-term assessment is that missile-defense capacity -- not merely the willingness to strike -- will shape U.S. options. Even with planned production increases, five-year replenishment estimates mean the United States faces a sustained tradeoff between protecting regional forces and allies now and preserving capacity for other high-end contingencies later.

Correction: An earlier version of this article misstated the timeline for Lockheed Martin's THAAD production targets. The company aims to increase annual output from 96 to 400 interceptors.