Middle East Escalation Impacts Mortgage Rates

Mortgage rates in the United States and Canada are increasing following the outbreak of war in the Middle East and the closure of the Strait of Hormuz, reversing a brief period of declining borrowing costs.

In the United States, the average 30-year fixed mortgage rate reached 5.98% in the final days of February 2026. This marked the first time the rate dipped below 6% in more than three years. However, following the start of the war in the Middle East on February 27, 2026, rates began to climb again.

By March 16, 2026, the 30-year fixed rate had risen to 6.11% after two consecutive weeks of increases. This movement followed a period where investors had anticipated as many as three quarter-point rate cuts from the Federal Reserve in 2026 due to stabilizing inflation and labor market signals.

Impact of Oil Prices and Inflation

The rise in mortgage rates is linked to soaring oil prices caused by the conflict and the resulting blockage of the Strait of Hormuz. These conditions have renewed concerns regarding inflation, which limits the ability of the Federal Reserve to implement rate cuts.

Mortgage rates track the yield on the 10-year Treasury security. Before the conflict, the 10-year yield had fallen below 4% as investors bought Treasury securities. As inflation concerns rose, these yields shifted, driving mortgage rates upward.

Canadian Mortgage Market Trends

Canadian homeowners are experiencing similar upward pressure on borrowing costs. Three- and five-year fixed mortgage rates increased by 0.5% within a three-week period, according to reporting from CBC News on April 4, 2026.

Toronto-based mortgage broker Marshall Tully stated that it’s possible that trend could continue regarding the increase in fixed rates.

Fixed-rate mortgages in Canada are backed by bond yields, which are susceptible to fluctuations triggered by global events such as wars. This volatility arrives as a significant number of Canadian homeowners face mortgage renewals.

According to the Canada Mortgage and Housing Corporation (CMHC), 1.4 million mortgages, representing approximately 23% of all mortgages in the country, are scheduled for renewal by the end of 2026. Many of these borrowers originally secured much lower rates in 2021.

Global Market Response

Major lenders have begun raising the price of mortgages as financial markets respond to the Middle East conflict. The instability has rattled investors and created a fragile environment for the housing market, which had previously shown signs of thawing as rates briefly dipped.

While some analysis of WTI price trends indicates that a de-escalating conflict may cautiously restrict oil rallies near $103.40, the initial shock of the war and the Strait of Hormuz closure has already manifested in higher borrowing costs for consumers in North America.