The University of Michigan’s preliminary consumer sentiment reading for March 2026 came in at 55.5, a modest 1.9% decline from February’s 56.6 and the lowest level in three months.
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But the headline number masks a much sharper deterioration beneath the surface: roughly half of the survey interviews were conducted before U.S. military action in Iran began, and half afterward.
The split reveals a very different story.
Interviews completed after the strikes began came in sharply lower and with rising inflation concerns — a divergence that Surveys of Consumers Director Joanne Hsu said was driven almost entirely by the Iran conflict.
Gas Price Shock Arrives in the Data
“Prior to the conflict, sentiment had been improving. Then, as soon as that conflict began, all the interviews thereafter came in lower — same thing with gas price expectations,” Hsu said during an interview on Bloomberg.
Gasoline prices are where the Iran conflict registered most sharply. In the first half of the survey window — Feb. 17 through 28 — one-year gas price increase expectations stood at 10%.
In the nine days that followed the start of U.S. military operations, they surged to 42.6%. Five-year expectations moved from 27.1% to 49.2% over the same period.
Oil prices — as tracked by the United States Oil Fund (NYSE:USO) — returned above $95 a barrel as of Friday morning, marking a 40% increase since the start of the war.
The AAA national average gasoline price stands at $3.63 per gallon, a sharp increase from $2.94 a month ago, underscoring the rapid spike in fuel costs following the escalation of the Iran conflict.
The shift is already feeding into consumer inflation expectations.
Among respondents interviewed after the conflict began, year-ahead inflation expectations climbed from 3.3% to 3.5%, while long-run expectations rose from 3.1% to 3.3% — an early sign that rising gasoline prices may be reshaping the inflation outlook.
Survey Split: Before vs. After Iran Conflict Began
| Measure | Feb. 17–28 | March 1–9 |
|---|---|---|
| Gas Price Expectations | ||
| 1-Year Ahead | 10.0 | 42.6 |
| 5-Year Ahead | 27.1 | 49.2 |
| Inflation Expectations | ||
| Short-Run | 3.3% | 3.5% |
| Long-Run | 3.1% | 3.3% |
Personal Finances, Jobs, and a 7.5% Confidence Drop
The damage extended beyond energy prices. Expectations for personal finances fell 7.5% nationally month over month — a broad-based decline that Hsu said cut across income, age and political affiliation.
Labor market views continued a year-long deterioration, with consumers broadly expecting unemployment to rise and reporting elevated probabilities of losing their own jobs.
More striking, according to Hsu, is who led the decline in the second half of the survey: the highest-income, highest-wealth consumers — the cohort whose robust spending propped up aggregate consumption in 2023 and 2024 — also posted sharp sentiment declines after the conflict began.
Not 2022 — But the Risk Is Different Now
When asked to compare the current consumer mood to the period around Russia’s invasion of Ukraine in 2022, Hsu noted that sentiment levels are not dramatically different. The key distinction, she argued, is the macro context.
Before the Russian invasion of Ukraine, inflation had already been on a steep upward trajectory, approaching its June 2022 peak. Consumers were absorbing a surging cost of living with limited relief in sight.
For this crisis, the situation is different. Inflation had been decelerating for years.
But the labor market is now weaker, and the geopolitical shock has hit at a moment when the spending cushion from high-income consumers may be eroding.
“Consumers expect their purchasing power to be eroded in the year ahead,” Hsu said.
Photo: hxdbzxy via Shutterstock
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