⛽️ How Conflict in the Middle East Could Impact Mortgage Rates

Hello Everyone! I hope everyone had a fantastic Father's Day weekend—especially all the amazing dads out there! Whether you relaxed with family or fired up the grill, I hope it was memorable.

We've got a packed newsletter this week covering how global tensions could impact mortgage rates, what the latest inflation numbers mean for buyers, and why staying informed right now matters more than ever.

Let's dive in!

Read time: ~4 minutes

Rates ended LOWER compared to last week, and volatility was HIGH. Rates are in the high 6’s for most loan types without paying discount points. Paying discount points can get you in the mid 6’s.

⛽️ How Conflict in the Middle East Could Impact Mortgage Rates

If you’ve caught the recent news about rising tensions between Israel and Iran, you might wonder what it has to do with your mortgage. More than you might think—these geopolitical flare-ups can send major ripples through financial markets.

Here’s what you need to know 👇

📉 Why rates often dip during global crises:

Geopolitical tensions usually drive investors toward safer bets like U.S. Treasuries. This typically lowers yields, dragging mortgage rates down, too. But interestingly, that reaction didn’t occur last Friday following Israel’s attack on Iranian nuclear targets.

🔥 The real risk: Higher oil prices, higher inflation:

Iran is a huge oil producer, and military tensions in that region tend to spike oil prices. Rising oil costs translate to higher prices across the board:

• More expensive fuel and transportation

• Higher costs for everyday products

• Increased operating expenses for construction, manufacturing, and airlines

If inflation makes a comeback, the Fed will pump the brakes hard on any rate cuts and might even increase rates again.

🚢 What if the Strait of Hormuz gets disrupted? 

This is the major worry. Around 20% of global oil passes through this narrow waterway near Iran. If Iran disrupts this flow:

• Oil prices surge dramatically

• Inflation jumps rapidly

• Markets spiral into panic

Under these conditions, rate cuts from the Fed become extremely unlikely. Mortgage rates could even rise sharply.

💡 What should buyers and agents do?

✅ Buyers: If rates dip temporarily, consider locking quickly. Keep an eye on oil—if prices hit $80-$90 per barrel, expect rates to jump again.

✅ Sellers: Be prepared. Lower short-term rates might re-energize buyers

✅ Agents: Be a calming presence. Your clients are seeing alarming headlines—be the steady hand that provides clarity and guidance.

📊 Inflation Eases (Slightly) — Good News for Rates Ahead?

We got some encouraging news this past week with inflation data coming in lower than expected. The Consumer Price Index (CPI) rose just 0.1% month-over-month (vs. 0.2% forecasted), and the annual number edged up slightly from 2.3% to 2.4%. Core inflation (minus food and energy costs) stayed steady at 2.8%. Translation: Inflation isn't accelerating aggressively, at least not yet.

One reason prices remain tame could be retailers still selling through inventory purchased before tariffs rose. Some companies might also be absorbing higher costs rather than passing them onto consumers.

On the housing front, shelter inflation—which measures housing-related costs—continued its downward trend, now at 3.9% annually. This steady decrease is positive news for mortgage rates and future affordability.

Still, the housing market continues facing major headwinds, especially higher rates. Fed Chair Jerome Powell has made it clear: inflation needs to get closer to their 2% goal, and job market conditions must weaken before we see any rate cuts.

This Wednesday, Powell will announce the Fed’s decision on rates. Right now, markets overwhelmingly (98% chance) expect no change. With tariffs paused until July and signs of a potential U.S.-China trade deal emerging, there’s reason to be optimistic about inflation—and mortgage rates—in the near term.

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