Why the Conflict in Iran is Pushing Mortgage Rates Higher

This week on the Breakdown, we discuss the recent conflict in Iran and its potential effects on mortgage rates and the U.S. housing market more generally. We’ll take a close look at what’s happening in Iran, how global issues affect mortgage rates, and what’s to come for the 2026 housing market if the war continues.

What’s Happening in Iran?

In recent months, the U.S. has been on the path to a more affordable real estate market. Mortgage rates have been slowly decreasing, Congress has been working on legislation to promote affordable housing, and buyers and sellers have been preparing for the busy summer months. Now, just as mortgage rates dipped below 6% for the first time in three years, a new conflict has shaken up the global stage: the war in Iran.

Conflict between the U.S. and Iran isn’t a new phenomenon by any means, but the U.S.’s most recent conflict with Iran started on February 28th, when the U.S. and Israel launched coordinated strikes in Iran framed as precautionary self-defense against Iran’s growing nuclear and missile programs. Iran retaliated with their own strikes across the region, and the conflict has continued for over two months, now involving other countries such as Lebanon and Iraq.

A key factor in this conflict (not technically a war, since Congress hasn’t approved anything) is that Iran is using the Strait of Hormuz as a leverage tool. The narrow strait is essential for transportation of goods and oil for countries across the world, with about 20% of the world’s oil moving through it each year. Iran is claiming control over the Strait and closing it for leverage against the U.S. and Israel, causing global panic and skyrocketing oil prices.

Is closing the Strait working for Iran? Not necessarily, since the conflict has continued amid several broken ceasefire claims. But the effects have been huge across the world, pushing oil prices up and, consequently, forcing U.S. mortgage rates to climb, a setback for affordability in an unstable housing industry.

Factors that Impact Mortgage Rates

Mortgage rates can move for many reasons, typically in response to movement in the U.S. economy. These rates fluctuate as the economy changes, generally offering lower rates in times of economic hardship and higher rates when the economy is stronger.

Ten-year Treasury yields are a major benchmark for mortgage rates. When the market value of T-notes begins to fall, the yield rate increases, which in turn increases 30-year mortgage rates—the two rates follow each other very closely. After the tensions in the Middle East broke out in late February, Treasury yields began to rise, moving from 3.96% in February to 4.46% by early May, the highest rate since July of 2025.

The federal reserve interest rates also affect mortgage rates, though not quite as closely as Treasury yields. When Fed interest rates are cut, mortgage rates tend to follow suit (sometimes before the Fed’s decision is even announced) and vice versa. This is not a guaranteed connection, though, as lenders sometimes move the opposite direction of the Fed, especially if unexpected global news happens.

Global or geopolitical issues are a player in mortgage rate fluctuation that many people overlook, but they’re a key aspect that can have major effects on rates on an everyday basis.

Why Global Events Affect Mortgage Rates

Global events and conflicts, especially those in the Middle East, affect much of our daily lives. The most immediately noticeable cost for Americans when oil prices increase is the cost at the gas pump. Just before the 2026 conflict started, the average price of a gallon of gas in the U.S. sat around $3.00. Now, that average has jumped to $4.50, with no signs of slowing down or decreasing.

Just as global events affect immediate, small-scale expenses for everyday Americans, they also affect the big purchases—but for different reasons. Gas price increases are directly tied to the cost of oil, but global events that involve fears of access to oil can cause mortgage rates to jump.

We use oil for manufacturing and transporting millions of goods, making it essential for running our society in the modern age. When oil flow is interrupted through the Strait of Hormuz, for instance, the economy suffers due to a fear of lack of access to this oil. That fear leads to panicking investors, which causes inflation to tick up, and that higher inflation creates an economic landscape that pushes mortgage rates higher.

Inflation concerns seem to be the driving factor behind this specific jump in rates, but it’s worth noting that the Fed did not increase or decrease the federal interest rate from a range of 3.5% to 3.75% in its April session, marking the third session the number has remained unchanged. Keeping an eye on the federal interest rate in the coming months (if the conflict continues) may provide insight into where mortgage rates will go next.

What to Expect if the War Continues Long-Term

Before the conflict in Iran broke out, the housing market was moving in the right direction for affordability, but the war has created a sizeable setback for mortgage rates, which could tamper optimism and slow the affordable housing push in the U.S.

The U.S. relies less on foreign oil now than in the past, so the effect on mortgage rates may not be as drastic as it would be without domestic oil power, but mortgage rates are still increasing the longer the conflict continues. As mentioned, before the war, mortgage rates had finally dipped just below 6% to 5.98% for the first time in several years. Once the U.S. conflict with Iran began, mortgage rates quickly spiked almost half a point to 6.46%, and today, they sit at about 6.37%.

It’s not quite time to panic yet. To put these numbers into context, the mortgage rates at this same time one year ago were 6.7%. The real estate market is in much better shape than it was last year, and mortgage rates are notably lower than they were then. However, this recent rate spike is catching attention because of the scale of the Iran conflict and the potential for a long-term conflict.

The longer the conflict continues, the more rates could swing back and forth. Over the past two months, President Trump has hinted at a win in the Middle East or outright stated that we’ve won over 12 times, despite the conflict not yet reaching an end. There have also been several ceasefire deals that have been made and broken between the two countries, leaving investors and lenders uncertain about inflation and mortgage rates. Only time will tell whether future ceasefire deals will hold and how this will affect mortgage rates long term.

Takeaways for Real Estate Investors

There’s no reliable way to predict where global conflicts, oil prices, or rates will go next. With the future for the end of the war being up in the air, your best bet as a buyer is to lock in low rates as you see them. No matter which direction mortgage rates move next, doing research and staying up to date is vital for potential homebuyers when making decisions about a property. By weighing your options carefully with all the available information, you’ll be equipped to make the most cost-effective deals for your portfolio in 2026.