"The US is spending heaps of money in this process of getting rid of Saddam. I doubt what ever oil concessions we get from the next Iraqi regime will recover our costs for this war and the last one against Saddam."

The last war didn't cost the US much money- the Japanese kick in a lot of money. And the Japanese are helping a lot in Afganistan (it's not that the Japanese won't gain for their investments). This war isn't too expensive- it's the "after Saddam is kick out" which will costs the big bucks. And it's not money thrown away- it's mostly investment type dollars. The reason it affects your economy is that large investment dollars are shifted. And the investment dollars are high risk (meaning high cost). The other high cost is the general uncertainty.
When the stock market was booming, people complained that the economy in general wasn't doing well. Now after the crash, the general economy is doing somewhat ok, but everyone is focused on the Dow Jones which is "saying" we are somewhere at the end of a big recession. If you see the stock market as what it was- a tech bubble instead a "economy which has changed all the rules", then the situation is appears less dire.
The stock market is simply one indicator and the bond market is actually a much better indicator to watch (though with huge investment flowing to Iraq, US bonds *could* crash [which would of course be another bad indicator- but it's understandable (that's why there is uncertainty now). But it's also possible for the US bond not to crash if the US handles the situation correctly AND some other unforeseen major event does not occur- floods, droughts, plagues, 911, etc.