05/20/2026
If you're watching mortgage rates and wondering where they go from here...
On Feb 27, the 30-yr fixed was 5.99%. As of yesterday, 6.75%. That's directly tied to the U.S./Iran war and its effects on oil prices, inflation, and Treasury yields.
Mortgages track the 10-yr Treasury yield. Rising inflation = rising yield. Rising yield = rising mtg rates. The 10-year is trading around 4.68%, a 16-month high. The 30-year Treasury hit 5.2% this week, an 18-year high. Not small numbers.
Here are 5 scenarios with probabilities for mortgage rates. Note: change could come quickly.
📗 Scenario 1: Full Resolution (12%)
Permanent peace deal is signed. The Strait of Hormuz opens unconditionally. Iran's nuclear program curtailed. Oil prices normalize.
→ Estimated rate impact: 30 yr mortgage to 5.99–6.25%.
Why it's unlikely: Iran insists nuclear enrichment is non-negotiable. The U.S. wants Iran to hand over ~440kg of enriched uranium and halt its program for 10+ years. Those aren't positions that compromise.
📘 Scenario 2: Fragile Peace (35%)
Framework signed. Hot war ends. The strait largely reopens. But talks, sanctions, and regional disputes continue for months or years.
→ Estimated rate impact: 30-yr mortgage around 6.25–6.625%
Why it's the most likely outcome: Both sides have financial incentives to stop the bleeding. But neither side capitulates, saving face or attempting to.
📙 Scenario 3: Frozen Conflict (31%)
The ceasefire holds on paper, but the Strait remains a contested chokepoint. Neither blockade fully lifted. Oil elevated. Inflation sticky.
→ Estimated rate impact: 30-yr mortgage climbs slightly 6.75–7.25%
This is roughly where we are today. The market distrusts narratives that are not confirmed by both sides.
📕 Scenario 4: Re-Escalation (22%)
Ceasefire collapses. Strikes resume. Iran retaliates on Gulf States. The strait closes hard.
→ Estimated rate impact: 30-yr mortgage spikes 7.25–7.75%+
This is not base case, but it is not remote either. Iran has fired on U.S. ships since the ceasefire. The conditions for re-ignition are present.
📓 Scenario 5: The Structural Floor (applies to all scenarios)
This one may matter most long-term. The war has accelerated global discussion about pricing oil in currencies other than the dollar. Iran, China and Russia are actively pushing non-dollar oil settlement. That would reduce investment in our debt. And we have a lot of debt to finance. Even in a peace outcome, these structural forces could create a higher interest rate floor.
→ Practical implication: Regardless of how the war ends, fragility has been introduced. Perhaps the administration knew this risk. Perhaps they miscalculated.
What does this mean if you're buying?
Don’t try to “time the market.” Too many variables and outcomes. Don't float the rate if you’re entering binding agreement. The potential for worsening outweighs that for improvement (right now). Let’s hope for de-escalation and a peaceful resolution. Or a time machine back to Feb 27.
