Here's a classic case of a headline number telling one story while the details underneath tell a much more dramatic one. The University of Michigan's preliminary consumer sentiment reading for March 2026 came in at 55.5. That's a modest 1.9% decline from February and the lowest level in three months. Not exactly front-page news, right?

But here's the twist: roughly half of the survey interviews were done before U.S. military action in Iran began, and half were done afterward. And when you split the data that way, you see a very different picture emerge.

Interviews completed after the strikes started came in sharply lower, with rising inflation concerns. According to Surveys of Consumers Director Joanne Hsu, this divergence was driven "almost entirely by the Iran conflict." So, the modest overall decline is really an average of two very different realities: a world before the conflict and a world after.

The Gas Price Shock Hits 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 in a recent interview.

And boy, did gas price expectations move. This is where the conflict registered most sharply in the consumer psyche. In the first half of the survey window (February 17 through 28), consumers expected gas prices to rise 10% over the next year. In the nine days after military operations began, that expectation surged to 42.6%. The five-year outlook jumped from 27.1% to 49.2% over the same period.

This isn't just theoretical worry. Oil prices, as tracked by the United States Oil Fund (USO), returned above $95 a barrel, 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 just a month ago. Consumers are watching the numbers at the pump climb, and they're building that into their expectations for the future.

That shift is already feeding into broader 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%. It's an early sign that rising gasoline prices may be reshaping the entire inflation outlook.

Beyond the Pump: A Broad-Based Confidence Drop

The damage extended well beyond energy prices. Expectations for personal finances fell 7.5% nationally month over month. Hsu noted this was a broad-based decline that cut across income, age, and political affiliation.

Views on the labor market continued a year-long deterioration, with consumers broadly expecting unemployment to rise and reporting elevated probabilities of losing their own jobs.

Perhaps more striking is who led the decline in the second half of the survey: the highest-income, highest-wealth consumers. This is the cohort whose robust spending propped up aggregate consumption in 2023 and 2024. They also posted sharp sentiment declines after the conflict began. When the folks who've been keeping the economic engine running start to get nervous, it's worth paying attention.

Not 2022, But a Different Kind of Risk

So how does this compare to the last major geopolitical energy shock, Russia's invasion of Ukraine in 2022? Hsu notes that sentiment levels aren't dramatically different. The key distinction is the macro context.

Before the Russian invasion, 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.

This time, 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. And when that expectation takes hold across the consumer base—especially among those with the most spending power—it creates a different kind of economic risk than we saw just a few years ago.