Iran Conflict Drives Mortgage Rate Increases, Threatening Spring Housing Market
The ongoing conflict involving Iran is sending ripples through global markets, and one of the most immediate domestic impacts is a rise in mortgage rates. After a period of decline that offered a glimmer of hope for homebuyers, rates are now climbing, potentially derailing the spring 2026 housing market.
Swift Impact on Mortgage Rates
Mortgage rates began to increase swiftly following the start of U.S.-Israeli military strikes on Iran on February 28, 2026. According to Freddie Mac, the average 30-year fixed mortgage rate stood at 5.98% on February 26, 2026, the lowest level since September 2022. By March 11, 2026, that rate had jumped to 6.19%, settling at 6.11% by March 12, 2026. This represents the largest weekly increase since April 2025, when tariffs caused bond yields to spike.
As of March 19, 2026, the average 30-year fixed mortgage rate has risen further to 6.22%, the highest level since early December. This increase translates to a significant financial burden for homebuyers. On a $400,000 mortgage, the difference between a 5.98% rate, and 6.11% rate is approximately $31 per month, or $11,160 over the life of the loan.
The Oil Price Connection
The primary driver behind the increase in mortgage rates is the surge in oil prices. Oil prices climbed 25% since the conflict began, rising from $71.23 per barrel on March 2 to $119.48 on March 9 – surpassing $100 for the first time since the Russian invasion of Ukraine in 2022.
Rising oil prices fuel inflation expectations. Mortgage rates are closely tied to the U.S. 10-year Treasury yield, which reflects investor sentiment regarding future inflation and economic growth. The 10-year yield has climbed from 3.96% before the war to roughly 4.28% as of this week, indicating investor fears of escalating inflation.
Impact on the Spring Housing Market
The timing of this rate increase is particularly concerning, as it coincides with the start of the spring homebuying season. Prior to the conflict, there was optimism that rates falling below 6% could revitalize the housing market. Even though, the recent increases are already weighing on demand, with mortgage applications falling 10% last week.
The sudden shift has disrupted a nascent recovery in the housing market. Heading into spring 2026, inventory was climbing and home price growth had cooled. The drop below 6% was seen as a psychological milestone, signaling a potential turning point.
Looking Ahead
The trajectory of mortgage rates will likely depend on the duration and intensity of the conflict in Iran, as well as its impact on global oil prices. If oil prices continue to climb – potentially reaching $120-150 per barrel – rates could rise significantly higher. Whether strong spring demand can overcome this upward pressure on rates remains to be seen.
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