United States consumer sentiment has reached a three-month low in March, as the war in the Middle East flares up inflation worries and casts a shadow over the economic outlook.
According to research from the University of Michigan, the Consumer Sentiment Index fell to 53.3 in March 2026, down from 56.6 in February and below last March’s 57.
The research also found that sentiment decreased across all ages and political parties.
“At this time, consumers appear to believe that any negative economic consequences of the Iran conflict are likely to be limited primarily to the short run,” University of Michigan economist and director of surveys Joanne Hsu said.
“These views are subject to change; however, if the conflict becomes protracted or if higher energy prices lead to meaningful, sustained increases in the prices consumers pay.”
One of the major concerns is the price of petrol, as the closure of the Strait of Hormuz disrupts oil shipments, driving oil prices up by more than 30%.
Retail gasoline prices have jumped US$1 to an average of $3.98 per gallon. According to the University of Michigan, gas price expectations surged about fivefold from last month, reaching their highest reading since 22 June.
“Long-run gas price expectations were just a touch higher than the year-ahead reading, suggesting that consumers do not necessarily expect short-term spikes to persist,” Hsu said.
“Five-year gas price expectations increased as well, but remain near their historical average.”
Consumer sentiment also fell in other dimensions of the economy.
Year-ahead expectations for personal finances fell 10%, while one-year expected business conditions plunged 14%.
About 61% of consumers expect unemployment to rise in the year ahead, up from 58% last month.
ANZ analysts said that while the one-year ahead inflation expectations did rise sharply, the levels were still well below the peak following the Liberation Day tariff announcement in April 2025.
The analysts also said they do not think higher short-term inflation expectations will overly concern policymakers.
“Given weakness in the labour market, employee bargaining power is diminished, and the potential for pass-through from higher inflation expectations to feed into wage-setting behaviour is constrained,” ANZ analysts said in a note to clients.
“For policymakers, long-run inflation expectations are what ultimately matter most for the credibility of inflation targets.”
Inflation concerns come as the Federal Reserve left its benchmark overnight interest rate in the 3.50%-3.75% range this month.
In updated projections released alongside the decision, U.S. central bank policymakers anticipated higher inflation and only a single reduction in borrowing costs this year.
