Consumer Sentiment Plunges To All-Time Lows on Iran War. Why Are Markets At Record Highs?

Consumer sentiment has collapsed to historic lows amid escalating geopolitical tensions related to the Iran conflict, reflecting heightened household anxiety over economic stability and inflation risks. Despite this, equity markets are trading at record highs, driven by safe-haven capital flows into large-cap U.S. stocks and expectations of central bank accommodation in response to growth concerns. The divergence underscores a decoupling between retail investor sentiment and institutional positioning, with markets prioritizing monetary policy expectations over near-term consumer weakness. The key transmission channel is risk appetite, as volatility spikes and defensive rotation support tech and bond-proxy sectors. Traders will watch the next CPI release for signals on whether inflation pressures persist amid supply chain disruptions linked to Middle East hostilities.

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