From restaurants to homes…the Iran war pushes Americans to cautious consumer spending | economy

In a restaurant in downtown Washington, DC, the crisis does not appear in the form of a sudden collapse, but rather in more empty tables than usual, and a sound that is lighter than the noise that was filling the place. The movement has not stopped, but it has lost its momentum, while requests pass through greater hesitation and calculation.

Mike, one of the restaurant workers, describes this transformation as “gradual but worrying,” noting that the decline in demand prompted the restaurant owner to reduce the number of employees, with revenues no longer covering the previous pace of operation. He added to Al Jazeera Net: “We used to be full almost every night. This is no longer the case.”

He continues, “A group of the middle class used to spend regularly on restaurants, but visiting a restaurant has become, with the rise in the prices of basic materials and gasoline, closer to luxury,” adding that “people have begun to calculate everything and are satisfied with the less expensive options.”

This shift in consumer behavior intersects with recent estimates by the Federal Reserve (the central bank), indicating that an increasing number of companies are adopting a “wait and see” approach in light of the escalating state of uncertainty, which is gradually beginning to be reflected in Americans’ daily spending decisions.

Cautious consumption

In a mall not far away, Linda stands in front of a storefront, checking prices before putting some purchases back in their place. She says that purchasing decisions are no longer automatic, but rather go through “careful calculations.”

She adds to Al Jazeera Net that “the war in Iran has begun to affect the way Americans consume, as it prompts many to be cautious, focus on priorities, and pay more attention to their purchasing decisions,” noting that the rise in gasoline prices may also be reflected in travel plans during the summer, in light of increasing pressures on the costs of living.

Linda criticizes the current administration, saying: “I do not understand how millions of dollars are being spent on a war that I see as unnecessary and caused by one person, when it would have been better to make the lives of Americans easier,” in reference to the policies of President Donald Trump.

A dream deferred

As for Rachel, a 40-year-old mother, she says that she has been trying for years to buy her first home, but the high prices and interest rates have made it beyond her ability. She explained to Al Jazeera Net: “I did everything I had to do. We saved, planned, and searched for a long time, but the dream became unattainable.”

She adds that the rise in interest rates again, in light of the repercussions of the war and the pressure it causes on energy prices and borrowing costs, prompted her to postpone the decision again, considering that the timing is no longer in her favor. “My kids are approaching college and I feel frustrated because I can’t own a home in this economy.”

According to recent data, the ability to purchase homes has declined to its lowest levels in years, with the widening gap between income and real estate prices, while rising interest rates have significantly increased the cost of real estate loans, which has prompted many potential buyers to retreat or postpone their decisions.

A contradiction between markets and reality

American investor and market analyst David Tuell asserts that “American consumer confidence has never been lower than it is now,” in light of the rise in prices of basic commodities and fuel, describing the American economy as “divided,” with the wealthiest groups benefiting, while the majority of Americans face increasing living pressures.

The head of Prochain Capital explains to Al Jazeera Net that the state of “anticipation” reflects real concern within the market, in light of an “unprecedented” war with Iran, which has caused disruptions in global supply chains, especially in vital sectors such as energy, fertilizers and gas.

Despite US markets recording record levels, Tuel warns that this optimism may be misleading, noting that investors “do not take into account the possibility of the war continuing or its long-term repercussions,” and that the markets are implicitly betting on a rapid containment of the conflict, a bet that may not hold true if tensions escalate.

Tull explains this discrepancy between the steadfastness of markets and the decline in individual confidence by saying that large companies do not find an incentive to take risks in light of the markets rewarding their current performance, which reinforces the state of stagnation in economic decisions. He believes that the United States may benefit relatively from the continuation of the crisis, as a “safe haven” compared to economies more exposed to the repercussions of the war, especially in Europe and the Middle East.

More complex risks

While Tuel sees markets reflecting a degree of confidence, David Pierre, a professor of economics and public policy at Virginia Tech, warns that the delayed effects of shocks may later translate into broader disruptions.

Pieri told Al Jazeera Net that the widening gap between the performance of financial markets and the real economy “is often a prelude to painful corrections,” explaining that an excessive rise in asset prices may be followed by a sharp decline whose impact extends to the real economy.

Regarding the war, Pierre points out that the current oil shock is considered one of the largest in history, but its full effects have not yet appeared, pointing out that the transmission of price effects through the economy “takes months or even entire seasons,” which, in his opinion, makes the current risks more complex.

Perry believes that the American economy, despite its relative strength, cannot separate itself from the global repercussions, noting that any disruption in energy markets and supply chains will inevitably reflect internally. He also points out that monetary policy makers are “leading the economy by looking in the rearview mirror,” referring to their reliance on late data that may limit the speed of response to rapid transformations.