US Consumer Sentiment Hits Historic Low Amid Iran Conflict and Energy Shocks

US consumer confidence has collapsed to its lowest level in over 60 years, reflecting the severe economic toll of the ongoing conflict in Iran. The University of Michigan's Index of Consumer Sentiment fell 6.6% from March to reach a historic low of 49.8, as households grapple with escalating costs of living. The primary driver of this decline is a significant gasoline price shock. Regular gasoline has surged above $4 per gallon, representing an increase of more than $1 since the start of the year. This energy spike is cascading through the economy, inflating costs for food, retail goods, and jet fuel, while diesel prices have similarly soared. Consumer anxiety is further evidenced by a 7% drop in the index of consumer expectations. One-year inflation expectations have climbed from 3.8% to 4.7%, suggesting that households anticipate prolonged price pressures stemming from supply constraints. In a stark divergence, the S&P 500 has risen 9.8% month-to-date, hitting record highs. This rally is largely decoupled from consumer sentiment, driven instead by the 'Agentic AI' boom. Strong quarterly results from Intel and increased demand for CPUs from AMD and Arm Holdings have propelled semiconductor stocks higher, as investors bet on AI infrastructure. While investors are optimistic that the worst-case scenarios of the Iran conflict are avoided, the Strait of Hormuz remains blocked. With consumer spending accounting for approximately 70% of US GDP, the fragility of the current market rally remains a concern if the collapse in sentiment translates into a significant slowdown in spending.