U.S. consumer sentiment increased in July, reaching its highest point since February, supported by indications of declining petrol prices at the pump in recent weeks, as reported by a new survey from the University of Michigan on Friday. An index from the university tracking consumer sentiment registered at 54.4 this month, an increase from 49.5 in June and surpassing economists’ expectations of 51.0. The increase in sentiment was observed across various demographics, including age, income, wealth, and political party affiliation, according to a statement from Joanne Hsu.

Year-ahead inflation expectations have decreased from 4.6% in June to 4.2% this month, a figure that remains significantly higher than the levels observed prior to the onset of the Iran war. A framework ceasefire deal between the U.S. and Iran in June has strengthened expectations that the Strait of Hormuz will be reopened for tanker traffic. The crucial waterway has been effectively closed since shortly after the onset of the conflict in late February, interrupting essential oil supply channels and heightening worries regarding a surge in energy-driven inflation.

Despite the preliminary agreement, Washington and Tehran have resumed their exchange of strikes, resulting in a renewed increase in oil prices. Over the past week alone, crude prices have surged by more than 14% and have returned to above pre-war levels. With prices still remaining “frustratingly high,” consumers are “hardly ebullient about the economy,” Hsu noted, flagging that sentiment is down 12% from a year ago. Long-run inflation expectations remained stable at 3.3%, slightly exceeding the 2.8% to 3.2% range observed in 2024.