Gas prices have climbed back above $4 a gallon for the first time since summer 2022, as the war in Iran pushes global oil prices higher and adds new financial strain for prospective homebuyers heading into the spring homebuying season.
The national average for regular gasoline reached $4.01 on Wednesday, according to AAA, crossing a key psychological threshold that could further erode consumer purchasing power at a critical moment for the housing market. AAA data show that the national average for regular gasoline has increased by over $1 since last month.
Financial markets also showed signs of volatility. Stocks rallied Tuesday on unconfirmed reports that President Trump was considering steps to wind down the conflict, though both the Dow and S&P 500 remain on pace for their worst monthly performance since September.
In another mixed signal, The Conference Board’s latest Consumer Confidence survey showed that, despite the oil price shock triggered by the war, consumer sentiment actually edged higher in March.
Taken together, the data paint an increasingly uneven picture for the critical spring homebuying season. Mortgage rates have surged in recent weeks alongside rising oil prices, threatening to dampen demand just as the market enters its busiest period.
Mixed signals from D.C. leave markets guessing
A year ago, expectations for a robust spring housing market unraveled as mortgage rates surged following President Trump’s early April tariff announcement, which rattled markets and reignited fears of a broader economic slowdown.
This year, the outlook is once again being shaped by external shocks. The trajectory of both the housing market and the broader economy now hinges largely on how long the war in Iran persists. The conflict has already driven oil prices sharply higher, fueling renewed inflation concerns and pushing mortgage rates upward just as the spring buying season gets underway.
President Trump’s plans for the war remain highly uncertain. Stocks rallied Tuesday after The Wall Street Journal reported that Trump had told aides he was open to ending the conflict even if the Strait of Hormuz remained largely closed to commercial shipping.
In a separate interview with the New York Post, Trump said he expects the war to end soon, suggesting other nations would ultimately be responsible for reopening the critical passage, which handles roughly 20 percent of global crude shipments.
But there is no clear U.S. timeline for ending the conflict, and Iranian officials have indicated they are not engaged in negotiations. Meanwhile, reports citing U.S. officials point to a continued military buildup in the region, including the arrival of troops from the 82nd Airborne Division. This has fueled speculation that the conflict could escalate, even as some view the move as a pressure tactic to force Tehran toward a settlement.
‘Affordability is now an elusive dream’
Speaking on Varney & Co. on Fox Business on Monday, Circle Squared Alternative Investments founder Jeff Sica described elevated energy costs as “kryptonite” for housing, warning that the market now faces a layered set of economic pressures.
“What we were hoping for is for rates to come down and mortgages to become more affordable,” Sica said. “Now we have a double wave of negatives because when oil goes up in price, everything goes up in price.”
Higher energy costs don’t just impact household budgets but can also influence broader financial markets in ways that directly affect mortgage rates. Sica pointed to movements in the 10-year Treasury yield, a key benchmark for mortgage pricing, noting that volatility tied to inflation expectations and energy prices can push borrowing costs higher.
“For first-time homebuyers, affordability is now an elusive dream until oil prices come down,” Sica said.
Mortgage rates remain one of the most critical variables in housing demand, and even modest increases can significantly reduce buyers’ purchasing power, especially for those already grappling with high home prices.
The diesel dilemma facing homebuilders
Beyond financing costs, Sica emphasized the role of energy prices in driving up the cost of building new housing — a key factor in addressing the nation’s supply shortage. Diesel fuel, in particular, plays an outsized role in the construction ecosystem, from transporting materials to powering heavy equipment.
“Think about the importance of diesel fuel on trucking,” Sica said. “In order to make houses more affordable, they need to build more, and all of those materials are shipped by trucks, and diesel fuels the trucks.”
For developers, rising fuel costs feed directly into project budgets, affecting everything from raw materials to labor logistics. “When we do a development deal, we look at the overall cost, and diesel affects everything,” he added.
A costly feedback loop
As costs rise, developers may delay or scale back projects, which could further constrain housing supply at a time when inventory remains tight in many markets.
The result, Sica suggested, is a negative feedback loop: higher energy prices increase construction costs and mortgage rates simultaneously, making it harder to both build and buy homes. “We will see a slowdown in construction,” he said.
That slowdown could prolong the housing market’s current imbalance, where limited supply and strained affordability continue to define conditions heading into what is typically the industry’s busiest season.
