Consumer confidence has hit a three-year low amid economic chaos caused by the Iran war, according to Deloitte’s Consumer Tracker.
The first quarter of 2026 saw the largest single-quarter fall in consumer confidence since Q1 2022, knocking levels down to a low of –14.1% last seen in Q3 2023.
High crude oil prices and headlines of skyrocketing inflation have stoked families’ fears over already stretched household budgets, according to Deloitte consumer insight lead Céline Fenech.
“The impact of recent geopolitical events on the price of energy will likely feel like another setback for consumers,” she said.
“Many were already facing a squeeze on their household budgets at the start of the year with the slowing of wage growth and a cooling jobs market.
“With the prospect of another increase in the price of essentials, consumer confidence continues to be tested and is trending downwards to levels last seen four years ago. For consumer sentiment and spending to improve, households will want to see a more certain outlook for the economy.”
Alongside a 7.2 percentage point drop in shoppers’ confidence over disposable income, consumers reported a 6.7 percentage point drop in discretionary spending over the first quarter of 2026.
The tracker registered a fall across all non-essential categories, particularly on alcohol and tobacco – down 15 points on Q4 2025 – and clothing and footwear, which dropped 11 points.
Almost a third (29%) of shoppers said they were only spending on essentials, up from a quarter (25%) in Q4 2025.
“While there is typically a drop-off in spending in January after the busy festive shopping period, the fall seen in Q1 is more representative of a conscious cutting back on non-essentials by consumers,” said Deloitte UK head of retail Oliver Vernon-Harcourt.
“At the same time, essential spending remains high, with consumers allocating most of their budget to everyday items that are particularly vulnerable to inflation.”
Even if Iran and the US negotiate a settlement for lasting peace in the coming week, the FDF has predicted that food inflation will reach 9% in 2026.
The prediction has not been universally accepted, and Tesco boss Ken Murphy said last week he “didn’t recognise” that figure.
But inflation will hit UK consumers as oil, gas and fertiliser prices have risen sharply in the conflict, affecting every stage of the food supply chain.
The FDF’s prediction was joined in April by data from farming consultancy Anderson’s that showed farming input costs had already risen 7.6% over the past 12 months, with further pressure coming later in the year as fertiliser shortages bite. In late March, the IGD forecast food inflation could hit 8% by summer 2026.
The extent of inflation depends on when – or if – the Strait of Hormuz reopens, as the strait controls about 20% of the world’s crude oil shipments.
Two negotiated ceasefires have now been broken. The latest instance occurred on 19 April as the US attacked an Iranian cargo ship attempting to leave the strait.
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