The conflict, unfolding against the backdrop of Israel’s genocide in Gaza and its broader regional military campaign, has intensified economic uncertainty, disrupted energy markets and placed additional pressure on American consumers already struggling with the rising cost of living.
While the Trump administration has repeatedly promised to reduce inflation, lower borrowing costs and make housing more affordable, the consequences of its foreign policy are moving in the opposite direction.
According to Freddie Mac, the average interest rate on a 30-year mortgage climbed from 5.98 percent just two days before the war began to 7.32 percent by October 22, significantly increasing the cost of financing a home for prospective American buyers.
The increase has come as oil prices have risen, financial markets have reacted to geopolitical instability and investors have grown increasingly concerned about persistent inflation.
Kate Wood, a lending expert at NerdWallet, said the war has played a more significant role in shaping mortgage rates than Federal Reserve policy this year.
“The Fed really hasn’t been the main character for mortgage rates this year. The Iran war has been a much more significant influence,” Wood said.
She explained that the impact has largely been transmitted through energy markets and inflation expectations, with investors adjusting their positions in response to the possibility of prolonged price pressures.
“A lot of what we’re seeing is actually investor concerns about inflation being translated through the bond market,” Wood said.
Mortgage rates are closely linked to longer-term US Treasury yields, which respond to inflation expectations and broader economic conditions.
As Treasury yields rise, mortgage rates generally follow, increasing borrowing costs for households and making an already difficult housing market even less accessible.
The financial consequences are substantial for American homebuyers.
On a $400,000 mortgage, the interest charged during the first month would amount to approximately $2,440 at a 7.32 percent rate, compared with around $1,993 at the 5.98 percent rate recorded before the war.
The difference represents approximately $447 in additional interest charges in the first month alone.
The administration’s housing initiatives have so far offered limited immediate relief, while the broader economic consequences of the war continue to complicate efforts to bring down borrowing costs.
Meanwhile, geopolitical instability has become an increasingly important factor in the outlook for US borrowing costs.
Federal Reserve Chairman Kevin Warsh acknowledged in September that international conflicts were among several factors contributing to higher long-term bond yields.
According to The Associated Press, Wall Street investors are anticipating another Federal Reserve interest rate increase in December, although the central bank has made no commitment to such a move.
Wood cautioned that even if the Federal Reserve raises its benchmark interest rate, mortgage rates will not necessarily increase by the same amount because they are influenced by a wider range of economic forces, particularly movements in the bond market.
For American households, however, the distinction offers little immediate comfort as borrowing remains expensive and the prospect of cheaper mortgages becomes increasingly uncertain.
Wood warned prospective buyers against assuming that waiting would necessarily produce better market conditions.
“If you are thinking, ‘Oh, I’m going to sit around, I’m going to wait for mortgage rates to go down.’ You can do that, but you do not know how long that wait is going to be,” Wood said.
“The right time to buy a home is always when it is the right time for you and your finances, not necessarily when you think it is the right market.”