How Does the Iran War Affect Mortgage Rates?

The U.S.-Israeli military strikes on Iran that began February 28, 2026, have already caused significant volatility in mortgage rates, reversing what had been welcomed progress in housing affordability. After falling below 6% for the first time since 2022—a key psychological threshold for homebuyers—the average 30-year fixed mortgage rate climbed back to 6.11% by March 12, according to Freddie Mac’s Primary Mortgage Market Survey. Understanding the connection between geopolitical conflict and mortgage rates helps homebuyers navigate this uncertain market and make informed decisions about timing their home purchases.

The Immediate Impact: From 5.98% to 6.11% in Two Weeks

The correlation between the Iran conflict and mortgage rates has been swift and measurable.

According to Freddie Mac, 2026, on February 26, just two days before the attacks began, the average 30-year fixed mortgage rate stood at 5.98%—the lowest level since September 202.

By March 11, that rate had jumped to 6.19%, and settled at 6.11% by March 12. This represents the biggest weekly increase since April 2025, when former President Trump’s “Liberation Day” tariffs caused bond yields to spike dramatically.

The rise may seem modest—just 13 basis points from the pre-war low—but it carries significant financial implications for homebuyers. On a $400,000 mortgage, the difference between 5.98% and 6.11% translates to approximately $31 more per month, or $11,160 over the life of a 30-year loan. For first-time buyers already stretched thin by high home prices, these increases matter considerably.

Why Oil Prices Drive Mortgage Rates Higher

The primary mechanism connecting the Iran war to mortgage rates runs through oil markets and inflation expectations. Oil prices surged 25% since the war began, climbing from $71.23 per barrel on March 2 to $119.48 on March 9—the first time breaking above $100 since Russia invaded Ukraine in 2022. Qatar’s Energy Minister warned that the conflict could force shutdown of exports within weeks, potentially pushing prices to a record $150 per barrel.

As Realtor.com economist Joel Berner explained, transportation difficulties among oil exporters historically accompany Middle East military conflicts. Since oil is essential for manufacturing and transporting goods, prices rise across the economy, stoking inflation fears (CNBC Select, 2026). Jeff DerGurahian, Chief Investment Officer at loanDepot, noted: “Without the geopolitical tensions, we would likely be seeing a 10-year Treasury well south of 4%, with mortgage rates in the high 5s. All of this hinges on the price of oil” (CNN Business, 2026).

The Treasury Bond Connection

Mortgage rates closely track the yield on 10-year U.S. Treasury bonds, which have climbed sharply since the conflict began. The 10-year Treasury yield rose from 3.96% on February 27 to 4.21% on March 11—a 25-basis-point jump in less than two weeks (CNBC Select, 2026). Typically, Treasury bonds serve as safe havens during global turmoil, with investors piling in and pushing yields lower. This time, however, yields moved in the opposite direction.

According to Fox Business,”The ongoing conflict in Iran has stoked fears of wartime inflation, sending yields on the 10-year Treasury climbing and driving mortgage rates higher,” explained Hannah Jones, Realtor.com senior economic research analyst. “This shift comes despite last week’s jobs data being weaker than expected…Under normal circumstances, these soft economic readings would put downward pressure on mortgage rates. However, the news out of the Middle East is overriding those signals” ( 2026).

Erica Adelberg, Chief MBS Strategist at Bloomberg Intelligence, added that volatility and rates have climbed in response to the strikes, triggering uncertainty around inflation, economic growth, and Federal Reserve policy. The conflict has pushed mortgage-backed security spreads to their widest levels since December 2025, more than fully offsetting January’s tightening.

Impact on Federal Reserve Rate Cut Expectations

The war has dramatically altered expectations for Federal Reserve rate cuts in 2026. Before the conflict, many economists anticipated 2-3 rate cuts this year as inflation moderated. Now, those predictions have shifted dramatically. CME FedWatch shows a 99% probability the Fed will hold rates steady in March, 95% in April, and 77% in June—up from 70% and 31% respectively just a month ago (CBS News, 2026).

“An already large headache for the Federal Reserve is going to turn into an even larger one, and it’s likely the Fed will not cut rates in 2026 and may even start talking about rate hikes later this year,” said Sonu Varghese, Chief Macro Strategist at Carson Group (CBS News, 2026). If oil prices remain elevated and inflation resurges, the Fed may be forced to maintain higher rates longer—or even raise them—keeping mortgage rates elevated throughout 2026.

Unpredictable Outcomes: Fear Can Push Rates Either Direction

Interestingly, geopolitical conflicts don’t always push mortgage rates higher. As Daryl Fairweather, Chief Economist at Redfin, cautioned: “Fear of higher inflation because of higher oil prices tends to push rates up, but fear about global stability and economic growth tends to push rates down” (Marketplace, 2026). In this case, inflation concerns are winning out over recession fears, but that balance could shift if the conflict escalates or economic data weakens further.

Susan Wachter, Professor of Real Estate at University of Pennsylvania’s Wharton School, noted that upcoming economic data could have as much or more impact on mortgage rates than the Middle East conflict itself. The interplay between war-driven inflation and potential economic slowdown creates unusual uncertainty for rate predictions (Marketplace, 2026).

Mitigating Factors: U.S. Oil Independence

One factor that may limit extreme rate increases is America’s reduced dependence on foreign oil. In 2008, the U.S. imported 12.91 million barrels per day; by 2022, that dropped to 8.32 million barrels daily—a 35% decrease (CNBC Select, 2026). Fairweather suggested: “We may be able to adapt out of it and stop exporting as much oil and rely more on domestic oil. And so the long-term impacts on oil and inflation might not be all that severe” (CNBC Select, 2026).

What This Means for Spring Homebuyers

The timing couldn’t be worse for the crucial spring home shopping season, when more buyers traditionally visit open houses and make purchase decisions. “The outlook for the spring homebuying season has become cloudier than it was even just a month ago,” said Lisa Sturtevant, Chief Economist at BrightMLS. According yo CNN, “If the conflict with Iran is limited, the housing market could rebound quickly. However, a prolonged conflict could stall home sales activity this spring.” .

Despite recent rate increases, affordability gains over the past year remain largely intact. Zillow economist Kara Ng noted that buying power is up about $30,000 compared to this time last year, as rates fell from the high-6% range to the low-6% range. “Households that did not buy or refinance a home during the mortgage rate dip might have missed a flash sale, but can still buy at a discount,” Ng explained (CNN Business, 2026).

Bottom Line for Homebuyers

The Iran war demonstrates how global events can rapidly affect domestic mortgage rates through oil prices, inflation expectations, and Treasury yields. While the 13-basis-point increase from pre-war lows may seem small, continued conflict could push rates significantly higher if oil reaches $120-150 per barrel and inflation resurges. Homebuyers should monitor both Middle East developments and economic data, remembering that rates remain well below 2023-2024 levels. As mortgage professionals often advise: the best time to buy is when you can afford it, regardless of whether you perfectly time the market.