Trump’s war on Iran is rapidly draining US navy budget, documents and interviews reveal

Exclusive: Experts and former officials say accounts are running dry, and funding a war with no clear endgame is the main challenge

Donald Trump’s war on Iran has driven the US military into a severe financial crisis, with the US navy forced to transfer money from its payroll and other sources to cover the costs of combat, according to documents obtained by the Guardian, and interviews with navy officials, contractors and defense analysts.

The US-Israeli operation, which has depleted US munitions stockpiles and prompted retaliatory Iranian strikes that have wrecked strategic bases across the Middle East, is piling pressure on budgets across the military.

One Pentagon memo about navy funding seen by the Guardian warns that there are “shortfalls in payroll” accounts due to the department “raiding” them to fund combat operations.

Experts and former officials say the accounts are running dry. “The piggy bank is broken,” said Harlan Ullman, a retired naval officer. Ullman is a member of the National Commission for the Future of the Navy but he said he is not speaking on the commission’s behalf.

One official and one navy contractor said non-emergency maintenance on shore-based facilities has been deferred because of the cash crunch.

When Trump started the war on 28 February, it quickly strained the military’s existing budgets – particularly that of the navy, which not only helped launch the initial wave of attacks but was later responsible for an extensive naval blockade. The White House eventually asked Congress for emergency funding to pay for the war efforts, but prospects that the request will be approved are dim amid the unpopularity of the war.

A navy official who was briefed on how the service is planning to address the shortfalls said money is shifted around in imaginative ways. “The money for payroll,” he said, “was robbed to pay for overseas contingencies and is being backfilled by money that hasn’t been spent. They are backfilling payroll so we get enough money in our paycheck.”

The navy’s budget for 2026, almost $300bn, has different batches of money allocated by Congress for various requirements: personnel, shipbuilding, procuring specific weapons systems and “operations and maintenance”, the day-to-day running of the fleet and its bases. The law limits how money can be rejiggered throughout all those batches of money.

The issue has occasionally surfaced in some hearings on Capitol Hill. Susan Collins, in a 21 July hearing of the Senate appropriations committee, said: “I’m told some military services face near-term solvency challenges.” A staffer said the navy was one of the services Collins was referring to.

In a statement, a navy spokesperson said maintenance and operations funds have not been depleted. “The Department of the Navy,” the statement said, “is actively managing its resources to meet current pay obligations on time. We continue to work closely with Congress to address ongoing operational demands and sustain our personnel and readiness throughout the fiscal year.”

Inside the service, the cash shortage is no secret. “They’re just not speaking publicly about it,” said Todd Harrison, a defense analyst at the conservative American Enterprise Institute. “And I suspect that is a deliberate decision of the civilian leaders in the Pentagon, starting at secretary, that this is for political reasons, that they don’t want to look like they’re damaging future military readiness over a war that is becoming increasingly a political liability.”

‘We face critical shortfalls’

The military knew the crisis was coming. In mid-May, Adm Daryl Caudle, chief of naval operations, cautioned Congress that the crunch would hit in July. “The FY ’26 budget didn’t bake in Epic Fury,” he said. “I do fear that I’ll have to start making decisions in the July timeframe on how I do force generation. That could make differences between how I do exercises, how I do routine operations in order to make sure that I … have the funds necessary to continue the war effort for Epic Fury.”

Pete Hegseth has pushed Congress for emergency funding, without which, he said in July, “we face critical shortfalls”. The defense secretary testified that the Iran war cost $35.7bn, but it’s unclear if that is a full accounting of the war’s costs.

When the Trump administration asked Congress for $67bn in emergency funds for the defense department, it didn’t break down how much would be for the navy. The House passed a $1.15tn defense bill in July and a separate budget authorization that would provide $73bn for the war in Iran, but it’s unlikely either will become law.

Ullman noted that during the wars in Iraq and Afghanistan, funding was more forthcoming from Congress because those conflicts were authorized by a resolution. “There is no authorization to use force in this case. Is Congress obliged to pay for a conflict it did not authorize?” he said.

‘They ran out of their money’

The fact that the navy is broke – or at least out of money for now – may be something of a slap in the face for Trump.

The president has often evoked what he sees as his affinity with Theodore Roosevelt, who was president from 1901 to 1909 and presided over the expansion of the US navy, deploying the so-called “Great White Fleet” that steamed around the world. Instead of a Great White Fleet, Trump’s administration has embraced the term “Golden Fleet”. Among his naval ambitions: plans for mammoth “Trump class” ships – the largest battleships in US history.

Trump’s micromanagement has included directing the navy to redesign an aircraft carrier so it launches jets with a steam and hydraulic catapult system rather than by an electromagnetic system. As the Guardian reported, every year since 2017 he has opined about his preferences in carrier launch catapults.

At this point, however, funding a war with no clear endgame is the main challenge. A former military officer now working for a navy contracting company, who has been briefed on the shortfalls, said: “They’re fucked. They shot all their weapons; they trashed all their ships; they ran out of their money.”