President Donald Trump, center, speaks during an announcement in the Oval Office of the White House on Tuesday, Sept. 2, 2025. (Al Drago/Bloomberg via Getty Images)
Americans' perceptions of the U.S. economy was gradually improving for the past three months. The Iran War is now driving it to a near all-time low due to spiking gas prices and volatility in financial markets, according to one closely-watched economic benchmark.
On Friday, the University of Michigan released its monthly report that showed a six-percent drop in consumer sentiment on the economy compared to February.
The outbreak of another war in the Middle East late last month stirred fresh anguish about the state of the economy among consumers of every income level, regardless of age and their political affiliation.
"Consumers with middle and higher incomes and stock wealth, buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment," said Joanne Hsu, the survey director, in a statement accompanying the report.
The latest drop in consumer sentiment could complicate the White House's ability to improve its political standing among voters ahead of the November midterms. A Reuters/Ipsos poll released Tuesday indicated only 29% of voters supported President Donald Trump's handling of the economy, the lowest rating in either of his two terms in office.
The White House said in a statement that the U.S. military's campaign against Iran was making "astonishing progress."
"President Trump has always been clear about temporary disruptions as a result of Operation Epic Fury," White House spokesperson Kush Desai said. "The Trump administration remains focused here on the home front implementing President Trump’s proven economic agenda of deregulation, tax cuts, and energy abundance."
Heather Long, the chief economist at Navy Federal Credit Union, observed that three of the lowest consumer sentiment readings recorded have occurred in the past nine months of Trump's second term. The first was Trump initiating his "Liberation Day" tariffs in April 2025 that unleashed chaos in markets, followed in November with the longest government shutdown in U.S. history.
Now the Iran War is contributing to souring public attitudes on the U.S. economy, she said.
"Americans are struggling to navigate all this uncertainty, along with price hikes and a frozen job market. Even wealthier consumers are turning gloomier this time," Long said in a social media post.
Gas prices have rocketed to a national average of near $4 per gallon as of Friday, according to AAA, reflecting the spike on oil prices from Iran closing the Strait of Hormuz, a key shipping route. A month ago, that average stood at $2.98. Demand for oil is inelastic, meaning a major price swing upwards does not dent the appetite for consumption.
The overall impact of the Iran War on the U.S. economy will depend on the conflict's severity and length. As a net-oil exporter, the U.S. is more insulated from energy shocks compared to other nations in Europe and Asia. Federal Reserve policymakers also didn't adjust their economic projections after their two-day meeting last week, the first since the war started.
