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Higher oil prices due to the U.S.-Iran war are straining an already strapped lower-income consumer . But as equities fall, there’s a warning sign that higher earners are also starting to feel the heat. Internal data from Bank of America on credit and debit card spending revealed that from the start of the war through March 21, lower-income households’ annual spending growth rate excluding gasoline slowed as higher energy prices took their toll. Meanwhile, higher-income households’ rate was largely stable. That data reveals that the war in the Middle East is only solidifying the K-shaped economy , where higher earners spend at elevated levels — keeping headline economic figures healthy with it — while lower earners struggle to stay afloat. Although wealthier people are still spending, their stance on the economy is weakening. Consumer sentiment fell more than three points to 53.3 in March, according to the University of Michigan’s monthly survey. The decline was more pronounced in the higher-income cohort. The survey’s director, Joanne Hsu, in a press release said that consumers with stock wealth were “buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict,” leading to bigger sentiment declines in these groups. A surging stock market has helped create a ” wealth effect ” for high-income households, where they feel more comfortable spending as their assets grow, even as their incomes aren’t necessarily rising. With upper income consumers disproportionately propping up U.S. consumer spending in recent years, the biggest risk to the economy has been a stock market correction, Goldman Sachs said in a February note . Theorizing that a weaker market could lead to higher earners pulling back — all while lower-income households still struggle — Goldman’s U.S. economist Pierfrancesco Mei estimated that a 10% fall in equities could lead to a 0.5% knock to GDP in 2026. A 20% fall could lead to a full percentage point reduction. On Friday , three out of the four major U.S. indexes slipped into correction territory, with the S & P 500 as the outlier. As of Monday’s close, the index was 0.6 percentage points away from being off 10% from its 52-week high, though stocks on Tuesday were rising and moving further away from that level. .SPX .DJI,.IXIC mountain 2026-01-28 .SPX vs. .DJI vs. .IXIC since Jan. 28, 2026 chart. Pooja Sriram, U.S. economist at Barclays, said the sentiment numbers reveal that higher earners are worried about the economic outlook, but not suffering yet like lower-income households. “I think people are really on the sidelines now,” she said. “It makes sense that it’s showing up in sentiment … but we’re not seeing that translate into the data so far. And just given the state of balance sheets, the wealth that people have accumulated over the past couple of years, even the 7% to 10% correction doesn’t necessarily make them poor by any stretch.” That wait-and-see behavior extends to investing, according to a Monday note by Goldman’s John Flood. He said investors are on the sidelines, with long only trading activity since the start of the Middle East war virtually non-existent. The uncertainty lingering over all forecasts is the difficulty in predicting the Iran conflict’s duration. A lengthy war will likely result higher earners feeling more of the pain. “Right now, it exacerbates this inequality,” Barclays’ Sriram said about the war. “Lower-income consumers are clearly starting to come under pressure, and the longer this lasts, we start getting worried about the overall risk to aggregate consumer spending.” — CNBC’s Fred Imbert contributed reporting
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