The U.S. Chamber of Commerce’s Small Business Index, which measures small business owner sentiment, fell to 67.0 in the first quarter, retreating further from its all-time high of 72.0 in the third quarter of 2025. The latest number may slightly undersell the anxiety surrounding the Iran war: the survey was conducted between Feb. 25 and March 11, meaning three of those 14 days occurred before the outbreak of the war. 

The data captured in real time what small business owners felt just as the war broke out, and they didn’t like what they saw.

Thomas Sullivan, the Chamber’s vice president of small business policy, said the picture is more alarming than the index score alone suggests.

“Honestly, they’re doing fine,” he told Fortune. “The challenge is that fine really isn’t good enough, especially when you look at the pro-growth incentives from the tax law that was signed last July.”

Only 28% of small business owners now say the U.S. economy is in good health, a 10-point collapse in a single quarter. Plans to increase staffing fell 12 percentage points to just 30%, the steepest single-quarter drop in the index’s history.

Sullivan said the Iran conflict is a key reason why. “A key difference with the military conflict in Iran is that there’s a direct connection to rising gas prices, and that is the double whammy for small business owners,” he said. “It’s more immediate, it’s more in your face, and it more directly impacts how you view the economy.”

That double whammy compounds a pressure that was already four years in the making. Inflation has been the top challenge for small businesses for 17 consecutive quarters, with 53% of owners naming it their biggest concern, up from 45% in the prior quarter.

“From a small business perspective, inflation is anything that costs more,” Sullivan clarified. “This is not the specific economics definition of inflation.”

The 28% who say the national economy is in good health stands in stark contrast to the 69% who rate their own business as healthy.

“The more control a small business has on the numbers, the more optimistic they are,” Sullivan explained. “No small business owner is going to hire a new employee, if in the back of their mind they think, in six months, they’re going to have to fire them. Because that decision is not a spreadsheet decision. It is an emotional decision.”

Nearly one in five (19%) say offering employee benefits and healthcare remains their biggest challenge. “Uncertainty is like, ‘we can’t grow, but we’re doing fine, and in order to maintain this level, I’ve got to keep my best employees,’” he said. “That’s why the concern for the cost of benefits is going up.”

This is also the first quarter where small businesses are not increasing their technology spend. “With the advent of AI and the efficiencies that small business owners are realizing, you would like to see their technology spend, their investments, going up,” he said.

Sullivan remains cautiously optimistic that the slide is not a permanent trend. “If the military conflict is over and small businesses are listening to their tax advisors and making significant investments, then we would see the numbers going upward,” he said. “That’s where I’m optimistic.”