The average interest rate on 30-year fixed-rate mortgages remained below 6% for the first time in three years for a week, but in the wake of the overseas conflict, interest rates reversed and reached 6.15% on Tuesday.
Homebuyers who were excited to see mortgage rates fall below 6% are likely disappointed as rates enter new territory of uncertainty following the U.S. attack on Iran over the weekend.
Last week, average interest rates on 30-year fixed-rate mortgages fell below 6% for the first time in three and a half years, but mortgage rates soared on Monday to their highest level in two weeks in response to the outbreak of the Iran conflict.
The average 30-year fixed rate loan rose 13 basis points to 6.12% on Monday, according to Mortgage News Daily. By Tuesday, that rate had risen to 6.15%. The move comes after the yield on the 10-year U.S. Treasury rose above 4% on Monday. Similarly, oil prices soared after the strike and killing of Supreme Leader Ayatollah Khamenei, reigniting inflation concerns.
Brent crude rose more than 8% on Monday and more than 6% on Tuesday, reaching $84.98 a barrel at one point.
When the economy becomes unstable, investors move money out of stocks and into bonds, pushing up prices and lowering yields, alleviating pressure on mortgage rates. That said, higher oil prices increase the likelihood of higher inflation, causing bond prices to fall and yields to rise.
“Today’s sharp rise in the 10-year Treasury yield suggests that concerns about inflation are having a stronger impact,” Joel Varner, senior economist at Realtor.com, said in a note. “The conflict has already started disrupting supply chains and driving up oil prices.”
Joel Varner |Credit: Realtor.com
Iran produces about 3 percent of the world’s oil, but about 20 percent of the world’s crude oil shipments pass through the Strait of Hormuz, which runs between Iran and the United Arab Emirates. Therefore, a prolonged conflict could lead to oil shortages and increased transportation costs.
“With oil prices reflected in the prices of almost every good in the economy, bond market investors are fearful of looming inflation and are demanding higher bond yields,” Berner said.
“Up until this point in 2026, mortgage rates had consistently declined relatively rapidly,” Varner continued. “This disruption to bond markets certainly has the potential to cancel out these gains. If inflation persists as a result of the conflict, this could be the start of an upward trend rather than just a temporary recovery.”
Because the dispute is still in its early stages, it’s unclear how much mortgage rates will change in response, but homebuyers should expect some fluctuations over a period of time, Berner added. Where interest rates go from here will depend on factors such as how long or extreme the Iran conflict becomes and how global supply chains react to the closure of the Strait of Hormuz.
President Trump initially predicted the conflict would last four to five weeks, but that prediction is far from certain. Speaking to reporters on Tuesday during a meeting with German Chancellor Friedrich Merz, the president acknowledged that oil prices may be high “for some time” but asserted: “I believe that as soon as this is over, oil prices will be lower than before.”
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