Consumers are getting more worried as war in the Middle East drags on

Americans are becoming more dour about the economy, pushing the University of Michigan’s preliminary sentiment index down to 55.5 for March.

The index dropped about 2% from February, hitting its lowest point this year. According to the University of Michigan, interviews done before the military action showed sentiment was improving, but answers collected in the next nine days erased those gains. The survey took place from February 17 to March 9, with about half of the interviews happening after the conflict started.

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Consumers reported declines in expectations for their personal finances, with a 7.5% drop nationally. The survey’s director, Joanne Hsu, said in a statement that higher gasoline prices had the most immediate effect on respondents, though the extent to which those costs would pass through to other prices remained uncertain.

The index measuring current economic conditions went up to 57.8 from 56.6, while the expectations index fell to 54.1 from 56.6.

Year-ahead inflation expectations held steady at 3.4%, ending a six-month decline. The University of Michigan said the current reading was higher than any level seen in 2024 and remained well above the 2.3% to 3.0% range seen in the two years before the pandemic. Long-term expectations dropped to 3.2%, which is still within this year’s range. People interviewed after February 28 expected higher inflation than those interviewed earlier in the month.

Bloomberg said economists surveyed expected the March sentiment index to be 54.8. The outlet also noted that sentiment could face more pressure from fuel costs related to the U.S.-Israel conflict with Iran, and pointed out that Americans were already dealing with a high cost of living.

Bloomberg reports that expectations for gas prices over the next year have risen to their highest level since 2022. Hsu said the airstrikes on Iran increased worries about fuel costs, and that any further tightening in global energy markets could push gas-price expectations and overall inflation expectations even higher.

Long‑run inflation expectations, measured over 5 to 10 years, dipped slightly to 3.2% compared with the prior month, according to Bloomberg.

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