Higher gas prices and stock market volatility stemming from the war in Iran weighed on Americans’ views of the overall economy in March, according to new data from the University of Michigan.

The Index of Consumer Sentiment showed sentiment ended March with a final reading of 53.3, marking a larger decline than the reading of 54 economists expected and the lowest reading in three months. Overall, consumer sentiment fell 5.8% from February and 6.5% from a year ago.

Consumer sentiment had been gradually improving in recent months, making the sudden downturn even more striking, the survey’s director, Joanne Hsu, told Yahoo Finance. However, Hsu suggested that those views are subject to change depending on how long the conflict lasts.

“Consumers are really going to be reacting not just to the geopolitical shock itself, but really on what’s happening throughout the economy,” Hsu said. “If gas prices recover, if we don’t see pass-through onto overall inflation, … then consumer views on this will recover.”

Read more: What is consumer confidence, and why does it matter?

The survey ran from Feb. 17 to March 23, meaning two-thirds of responses were collected after the US-Israeli strikes on Iran began.

Surging crude oil prices due to the Strait of Hormuz closure have led to an immediate increase in gas prices, which are expected to remain elevated as long as traffic through the strait remains stalled. Gas prices have increased by more than $1 on average in the last month alone, according to AAA.

As consumers began to feel the ripples of the war’s impact and higher energy prices, they raised their short-term inflation expectations.

Friday’s reading from the University of Michigan also showed year-ahead inflation forecasts rising to 3.8% from 3.4% in February. That was the largest one-month increase since April 2025, when President Trump announced sweeping global tariffs that shocked markets.

Current inflation expectations also remain well above the 2.3% to 3% range seen in the two years before the pandemic.

Americans still believe long-term inflation is here to stay, but were a bit more optimistic, expecting long-term inflation at 3.2%, down from 3.3% last month. That view was above the consistent readings in 2019 and 2020, which were below 2.8%.

Consumer sentiment fell across all ages and political parties, Hsu said in the release.

Individuals in the middle- and higher-income tax brackets reported “particularly large drops in sentiment,” Hsu said, as more of their wealth was tied to the stock market. This suggests their outlooks were affected by “both escalating gas prices and volatile financial markets in the wake of the Iran conflict.”