War is costly. The ongoing American-Israeli war on Iran is already reverberating through the global economy. For most people, including American citizens, it means higher fuel prices and greater economic uncertainty. But for a narrower group of entities, war can also be extraordinarily profitable. Chief among them are segments of the United States oil and gas industry, which have already profited from Russian President Vladimir Putin’s decision to invade Ukraine and the ensuing sanctions on Russian oil and gas exports.Now, the escalation of hostilities between the U.S., Israel and Iran has once again rattled global energy markets. Fighting and the closure of the Strait of Hormuz — one of the world’s most important oil shipping routes — have triggered what some have described as “the biggest oil disruption in history.” Read more: What is the Strait of Hormuz, and why does its closure matter so much to the global economy? By early March, oil prices had briefly surged to US$119 per barrel — roughly double their level at the end of 2025. Prices have since settled at near US$100 a barrel, though volatility remains.The escalation illustrates a familiar pattern in the political economy of fossil fuels: public costs paired with private windfalls.The shock to global energy marketsThree months ago, few analysts expected 2026 to be a particularly profitable year for fossil fuel producers. Global supply was expanding rapidly and U.S. gas prices were expected to fall below US$3 a gallon. Production growth in the U.S., Canada, Brazil and Argentina was colliding with weaker demand growth and the ineffectiveness of sanctions on exports from Russia, Iran and Venezuela. Many analysts warned of an emerging glut that could push prices downward. The International Energy Agency, for instance, projected a potential global oil surplus of nearly four million barrels per day in 2026.That outlook changed abruptly following the U.S.-Israeli attack on Iran and the country’s retaliatory attacks on energy infrastructure and tanker traffic through the Strait of Hormuz, a strategic chokepoint that normally carries roughly one-fifth of the world’s traded oil and natural gas.Even a partial disruption carries immediate consequences. Though the strait has been a cornerstone of U.S. and world energy security for more than 60 years, the Donald Trump administration apparently underestimated the possibility that the Iranian regime would blockade it and pummel U.S.-allied countries in the region.For consumers and most businesses, such price spikes function as a tax. Higher energy costs ripple through transport, food production, manufacturing and household budgets. American drivers feel the impact at the pump, while industries dependent on fuel or petrochemicals see their operating costs climb.The hidden household costs of warEstimates suggest that for every increase of US$10 per barrel, additional fuel costs amount to roughly US$560 per year per American household, including costs embedded in goods and services. If prices remain at around US$86 instead of the expected US$51 forecast for 2026, the added burden could reach about US$2,000 per household annually.These figures do not include the direct military expenditures, which were conservatively estimated at US$11 billion for the first week of strikes against Iran. Even military spending of US$200 million per day (10 times less than the highest estimates at the current intensity) would amount to an additional cost of US$541 per household annually. In short, a prolonged war combining high energy prices and sustained military expenditures would likely amount to between three to four per cent of the median U.S. household expenditure — roughly half of what many families spend annually on food or health care.Lessons from recent warsRecent history offers revealing precedents. The costs of the Iraq War (2003 to 2011) for Americans has been estimated at about US$1.2-3 trillion in total long-term costs, equivalent to about US$16,700 to US$41,750 per household in current U.S. dollars. Yet the war did achieve the goal of reopening access to Iraqi oil fields for American oil companies.More recently, the invasion of Ukraine by Russia cost an estimated one per cent of global GDP in 2022 and added 1.5 per cent to global inflation in 2022-23. Ukraine, of course, paid the largest price for the war, but direct impacts in Europe amounted to about 1 trillion euros.Much of these costs ultimately translated into profits for oil and gas companies, especially liquefied natural gas (LNG) companies from the U.S. and producers in Australia and the Gulf states.Profits on a single LNG shipment from the U.S. to Europe increased fivefold from about US$17 million to US$102 million.A similar dynamic is now unfolding again.Who really benefits from rising oil prices?This time, with major Gulf states themselves exposed to the conflict, U.S. and other exporters less directly affected by the war may have even greater room to increase profits. American LNG companies could see windfalls approaching US$20 billion per month.The main lesson is that petro-states, including Iran, Russia and the U.S., don’t hesitate to go to war partly because they believe oil revenues will bail them out, if not further enrich them. In fact, in seeking to justify the attack on Iran and the continuation of the conflict, Trump argued that “the United States is the largest oil producer in the world, by far, so when oil prices go up, we make a lot of money.”This, of course, depends on who “we” refers to. The populations of most petro-states have paid dearly for the wars involving their countries, whether it’s been Angola, Chad, Iraq, Libya, Nigeria, Russia, Syria and now Iran.The U.S. has fared much better economically, but the gains have been mostly for its companies, not its population. Higher oil and natural gas prices generate enormous revenues for U.S. oil producers and LNG exporters along the Gulf Coast as global gas markets tighten. Investors and shareholders in these sectors stand to gain from rising margins and market valuations.American households, however, face the opposite effect. Fuel prices rise. Inflationary pressures intensify. Transport and heating costs increase. The gains accruing to producers are therefore not only partially financed by the most import-dependent countries with the least strategic reserves but also by low-income households who are stuck in a carbon-intensive economy they can least afford to escape.Philippe Le Billon receives funding from SSHRC.