Homebuyers who were excited about mortgage rates dropping below 6 percent are likely now disappointed as rates have been launched into new realms of uncertainty following the U.S. strike on Iran over the weekend.
Last week, the average 30-year fixed-rate mortgage rate fell below 6 percent for the first time in three-and-a-half years, but after conflict erupted in Iran, mortgage rates surged on Monday, hitting a two-week high.
Monday’s average 30-year fixed-rate loan rose 13 basis points to 6.12 percent, according to Mortgage News Daily. By Tuesday, that rate was up to 6.15 percent. The move came after the yield on the U.S. 10-year Treasury rose back above 4 percent on Monday. Likewise, a spike in oil prices followed the strike and killing of Supreme Leader Ayatollah Ali Khamenei, reigniting inflation worries.
Brent crude oil rose more than 8 percent on Monday, and was up more than 6 percent on Tuesday, at one point hitting $84.98 per barrel.
When the economy hits shaky ground, investors shift their money out of stocks and into bonds, pushing prices up and yields down, which eases mortgage rate pressure. That said, surging oil prices increase the likelihood of higher inflation, which pushes bond prices lower and yields higher.
“We are seeing the 10-year Treasury yield rise sharply today, which implies that fears surrounding inflation are the stronger effect,” Realtor.com Senior Economist Joel Berner said in a report by the company. “The conflict has already started to stymie supply chains and send oil prices higher.”
Joel Berner | Credit: Realtor.com
Iran produces roughly 3 percent of global oil, but, about 20 percent of global crude oil shipments move through the Strait of Hormuz, which passes between Iran and the United Arab Emirates. Therefore, if the conflict becomes more drawn out, it could lead to oil shortages or higher shipping costs.
“Oil costs make their way into the prices of nearly every physical thing in the economy, so debt market investors are spooked by looming inflation and are demanding higher yields on Treasury bonds,” Berner said.
“Up until this point in 2026, mortgage rates had been on a consistent and relatively speedy decline,” Berner continued. “This disruption to the bond market certainly has the potential to undo those gains, and if we do see persistent inflation resulting from the conflict, this could be the start of an upward trend rather than just a one-off bounce-back.”
With the conflict still in early days, it is unclear just how much mortgage rates will fluctuate in response, but homebuyers should expect a period of volatility, Berner added. Where rates move from here will depend on factors like how long or extreme the conflict in Iran becomes, and how global supply chains respond to the blockade in the Strait of Hormuz.
President Trump initially said he expected the conflict to last four to five weeks, but that prediction is far from certain. While speaking to reporters during a meeting with Chancellor Friedrich Merz of Germany on Tuesday, the president recognized that oil prices might be high “for a little while,” but asserted, “as soon as this ends, those prices are going to drop, I believe, lower than even before.”
