How a war in the Middle East is hiking your mortgage rate in America

Like any global conflict, its repercussions ripple outward far from the immediate war zone. As KPMG chief economist Diane Swonk illustrated in a recent report, the war has set off a “butterfly effect” across the global economy. 

Now, the war’s disruption in the Strait of Hormuz is being felt by homeowners in towns across the U.S.

The 30-year fixed mortgage rate rose to 6.43% last week. That’s more than 30 basis points higher than at the end of last month—and its highest level since October 2025, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The 30-year mortgage rate sits at 6.4% as of Thursday.

Joel Kan, MBA’s vice president and deputy chief economist, said elevated oil prices, driven up by the Iran conflict, and the ensuing shipping crisis in the Strait of Hormuz, are contributing to the rate hike. 

“The threat of higher-for-longer oil prices continued to keep Treasury yields elevated, and mortgage rates finished last week higher,” Kan said in a statement. “Higher mortgage rates, coupled with affordability constraints and economic uncertainty, pushed some potential homebuyers to the sidelines.” 

Since the 30-year mortgage rate is benchmarked to the rate of the 10-year Treasury note, mortgage rates rise when the 10-year Treasury note rises. The 10-year Treasury is up to 4.39%, up from about 3.96% from before the start of the war.

The U.S. housing market was already under pressure

The housing market was already under pressure before the war’s start due to a dire housing shortage and concerns about the job market, especially among younger prospective buyers. Even Zillow’s CEO Jeremy Wacksman said homebuyers shouldn’t expect conditions to improve. 

“We aren’t expecting any relief in the short term,” he told Fortune in a recent interview. “I think it’s just going to take a while.”

The surge is also hitting refinance demand, not just purchases, as higher rates have reversed activity that had briefly improved earlier in the month. The MBA report—a weekly survey of respondents that include mortgage bankers, commercial banks, thrifts, and credit unions—also found refinance applications were down 15%. The Refinance Index, a measure of the volume of mortgage applications for refinancing existing loans, dropped 15% from the prior week.

It’s not just mortgage rates; the war’s impact on energy and other commodities are adding insult to injury to an already faltering U.S. economy. As Swonk noted in her report, higher-for-longer oil prices could hike inflation in the near term. Grocery prices are expected to take a hit. It’s no surprise to car owners across the U.S. that gas prices are off the charts, hitting a national average of just under $4 per gallon, according to AAA. And some economists have even invoked the dreaded S-word: stagflation. 

Uncertainty sidelining potential homebuyers

Potential homebuyers are being spooked by war-driven economic uncertainty, along with other factors, including the emerging threat of an AI-induced job apocalypse. Aside from higher mortgage rates, increased energy costs and stock market volatility associated with the war have caused 1 in 4 Americans to pause big purchases like homes and cars, according to a Redfin report released earlier this month. However, the report also notes that the majority of Americans still remain undeterred by the conflict.

That uncertainty looms in the air on Wall Street as investors try to navigate shifting signals from Washington. President Donald Trump announced Monday the U.S. and Iran had been in talks to end the war, sparking a $1.7 trillion stock market rally, and bringing oil prices briefly below $100 a barrel. But Iran’s foreign minister then said, while messages had been exchanged between the U.S. and Iran, no peace talks have taken place. Today, the price of oil is back up to $105 a barrel, measured using the Brent benchmark, up about $6 in just a day.

A Redfin report released Thursday said the back-and-forth is keeping some homebuyers sidelined.

“Markets are bouncing around this week as investors try to keep up with conflicting messages about the conflict in the Middle East,” the report read. “Stocks and bonds rallied on Monday after the White House said the U.S. and Iran had productive conversations, but it is unclear when the conflict will end.”