Economic Watch: U.S. consumer sentiment takes nosedive amid Iran war

A man shops at a supermarket in New York, the United States, on April 10, 2026. The U.S.-Israeli war with Iran showed no signs of ending, causing a sharp decline in consumer sentiment in April. The consumer sentiment index dropped 3.5 points to 49.8, matching the low seen in June 2022, according to the University of Michigan’s report. Sentiment declines were observed across political lines, income levels, age groups, and education levels. Expected business conditions for both short and long-term horizons declined, nearly matching year-ago readings influenced by reciprocal tariffs. The Iran conflict primarily affected consumer views through increased gasoline prices and potential rises in other costs. Dean Baker, co-founder of the Center for Economic and Policy Research, stated that sentiment will remain weak until the Iran war ends. Gas prices are expected to stay high, potentially rising further, while airlines are cutting back flights and raising prices as people plan summer vacations. Economists like Gary Hufbauer and Baker predict oil prices will remain around $90 to $100 per barrel post-war, with prices likely elevated for several months. Inflation expectations surged from 3.8% in March to 4.7% in April, the largest one-month increase since April 2025, exceeding pre-pandemic levels. Long-term inflation expectations climbed to 3.5%, the highest since October 2025. The University of Michigan report followed a Bureau of Labor Statistics finding that the consumer price index rose 0.9% in March. The prolonged U.S. naval blockade of Iran’s ports, set to continue indefinitely, and Iran’s demand for lifting the blockade before negotiations resume with the U.S. further strain economic conditions.