Consumer Sentiment Plummets Amid Iran War and Rising Gas Prices: University of Michigan Survey Reveals Concerns
The latest University of Michigan Survey of Consumers reveals that U.S. consumers are increasingly concerned about the economy due to the ongoing war and rising gas prices. The Consumer Sentiment Index dropped to 53.3% in March, the lowest level since December 2025. Consumers are more pessimistic about the future of the economy than the present situation, with escalating tensions in the Middle East contributing to this sentiment.
The Iran war, now in its fourth week, has led to threats of a ground campaign by the U.S. and Iran's closure of key oil shipping routes like the Strait of Hormuz and the Strait of Mandeb. These actions have raised concerns about energy price volatility and disruptions in the global auto supply chain. The increase in gas prices has a direct impact on fuel costs for gas-powered vehicles, further affecting consumer sentiment.
As the conflict persists and gas prices continue to rise, consumer sentiment is expected to decline further. The survey results indicate a significant drop in sentiment across different demographics, with middle- and higher-income consumers experiencing larger declines. The short-term economic outlook and year-ahead expected personal finances have also taken a hit, reflecting the current uncertainties in the market.
The survey data collected after the war started showed a notable increase in year-ahead inflation expectations, indicating growing concerns among consumers. While some investment firms are cautious about the economic impact of rising oil prices, others like BNP Paribas remain optimistic about the U.S. economy's ability to withstand the shock. The firm believes that the U.S. economy is well-equipped to handle moderate price rises in oil and maintains a positive outlook on the job market and unemployment rate.
Despite the challenges posed by the ongoing conflict and escalating gas prices, the survey suggests that consumer sentiment may fluctuate based on the duration of the Iran war and the potential impact on overall inflation. The U.S. economy's resilience and policies are seen as key factors in navigating through the current economic uncertainties.