The Iran conflict came just as Americans were feeling better about the economy

By Greg Robb

Consumer sentiment drops to lowest level of the year

Prices at the gas pump have risen to $3.63 a gallon in the latest week from less than $3 a month ago.

Consumer sentiment was improving in late February - before the military action in Iran - but has since turned sour, the University of Michigan reported Friday.

Gasoline prices hit sentiment the hardest. A swath of consumers across incomes reported declines in expectations for their personal finances. Economists worry that consumers will pull back their spending.

The University's gauge of consumer sentiment fell to a preliminary March reading of 55.5 from 56.6 in the prior month. That did, however, beat the expectations from economists polled by the Wall Street Journal, who said sentiment would dip to 55.3 in March.

The survey period for the index ended on March 9, making this the first economic indicator to reflect the conflict's impact - at least partially.

Key details: A subindex that measures what consumers think about the current state of the economy increased to 57.8 from 56.6.

Meanwhile, a measurement of expectations for the next six months dropped to 54.1 from 56.6.

Inflation expectations remained steady in the month, but economists think they are likely to rise.

Big picture: Consumer spending has moderated in recent months as consumers are feeling an affordability crunch. Cheap gas has been one of the few reliefs for middle- and moderate-income family budgets - and now that's gone, said Heather Long, chief economist at Navy Federal Credit Union.

Looking ahead: "We doubt that future Michigan survey results will look as rosy as this one, and this report is pretty downbeat," said Carl Weinberg, chief economist at High Frequency Economics.

Market reaction: Stocks SPX were mixed in late-morning trading, while the 10-year Treasury yield BX:TMUBMUSD10Y stood recently at 4.27%.

-Greg Robb

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03-13-26 1125ET