Americans' confidence in the economy dropped in July as escalating U.S.-Iran hostilities pushed gas prices back above $4 per gallon, erasing modest gains from earlier in the summer. The Conference Board reported Tuesday that its consumer confidence index fell to 90.8 in July from 92.2 in June, marking a retreat to the tepid range that's persisted since the beginning of the year. That's a stark contrast to late 2024 and early 2025, when readings consistently topped 100.
The decline underscores how foreign policy decisions carry direct consequences for American households. What began as a military confrontation in late February has morphed into an economic burden that's hitting consumers at the pump and the grocery store, with political ramifications now looming just 100 days before the midterm elections.
The Iran Factor
After being attacked by the U.S. and Israel in late February, Iran shut down the Strait of Hormuz, through which about one-fifth of the world's oil travels. The closure caused an immediate spike in gas prices that had only recently begun to moderate. Consumer attitudes had improved modestly in June as gas prices came down to around $3.70 a gallon from more than $4.50 a gallon in late April and early May. But as fighting in the Middle East escalated, the average price for a gallon of gas in the U.S. started to rise again. On Tuesday it was $4.10, according to AAA.
The energy price shock accelerated inflation and caused Americans' inflation-adjusted incomes to decline. Inflation had risen since Trump's inauguration last year, to 3.5% from 3% in January 2025. It jumped even further after the Iran war began Feb. 28, when it was just 2.4%. President Donald Trump continued to blame inflation on his predecessor, Democrat Joe Biden.
Grocery Prices Hit Hard
Write-in responses to the survey, collected from July 1 to July 22, remained pessimistic. The Board said references to gas prices were down slightly but remained elevated. Respondents' mentions of food and grocery prices increased, reflecting a grinding reality that won't ease quickly.
Government data showed that buying food to bring home had gotten 33% more expensive since the beginning of 2019. To navigate those higher prices, Americans turned to couponing, comparison shopping and cutting back on favorite foods as they absorbed the biggest jump in grocery prices in a half-century. Beef epitomized out-of-control grocery prices for many Americans. The price of a pound of ground beef reached $6.82 in June, 79% more than at the beginning of 2019, according to Bureau of Labor Statistics data.
The cumulative effect of five years of elevated inflation has left Americans soured on the economy, posing a risk to President Donald Trump and Republicans in the midterm elections, which were now less than 100 days away.
Labor Market Softens
References to jobs and unemployment picked up slightly this month and views of the current job market fell. Expectations of how the labor market would be six months going forward improved slightly, but remained in negative territory. U.S. employers slowed hiring last month and added only 57,000 jobs, less than half the previous month's total.
The unemployment rate declined to a low 4.2% from 4.3% in May, though the drop mostly occurred because many people out of work gave up looking and were no longer counted as unemployed. That's a troubling sign that the headline number doesn't capture underlying weakness.
The number of consumers who mentioned war and geopolitics decreased this month, but the Board said recent escalation in fighting between Iran and the U.S. could cause those mentions to rise in the next survey.
Why This Matters:
The economic fallout from the Iran conflict demonstrates how quickly foreign entanglements can translate into kitchen-table concerns for American families. With inflation now at 3.5% and gas prices climbing again, consumers face a double squeeze that erodes purchasing power and dampens economic sentiment. The timing couldn't be worse for Republicans heading into midterms, as voters historically punish the party in power when their wallets hurt. More fundamentally, this episode raises questions about the cost of military engagement abroad when the domestic economy remains fragile. The weakening labor market adds another layer of concern, suggesting the inflationary pressures may be slowing growth without bringing price stability. How the administration navigates both the military and economic dimensions of this crisis will likely determine both electoral outcomes and the trajectory of American household finances through the rest of 2026.