Growing fears of a global energy crisis threaten to derail the key spring housing season as the US-Israel war with Iran sends oil prices soaring, and the path to a resolution unclear.
In the US, regular gasoline prices averaged $3.72 per liter on Monday, up 27% from last month and the highest since October 2023, according to AAA.
The president Donald Trumpwho made low fuel prices a key campaign pledge, insisted that the price disruption would be a temporary blip that would disappear soon after a quick military victory over Iran.
But there are growing signs that Iran intends to fight a long war against the global economy by restricting tanker traffic in the Strait of Hormuz, a key route for 20% of the world’s crude oil supply.
On Sunday, Iran’s Foreign Minister Abbas Araghchi appeared on CBS News’s Face the Nation, saying that “nothing is off the table” regarding negotiation talks, and insisted that “we are ready to defend ourselves as long as it happens.”
In the housing market, the full impact of the war is still unclear. But as the recession enters its third week, it continues to send mortgage rates higher, just as the spring home-buying season begins.
“The biggest impact on the housing market of the war in Iran and the subsequent oil shock will be on mortgage rates,” said Realtor.com® Senior Economist. Joel Berner. “Wartime inflation is common, but the fear surrounding this conflict is all the more prominent because of the impact on global oil distribution.”
Brent crude, the international standard, has remained above $100 a barrel since last week, up from around $70 before the war began.
“The significant increase we’ve already seen in oil prices has fed into the cost of transporting everything tangible in the world economy, driving up prices everywhere,” Berner said. “If rates are expected to be higher in the future, futures become less expensive and today’s money becomes more expensive, which is what we’re seeing with mortgages as rates continue to rise from their lows at the end of February.”
Mortgage rates hit a three-year low of 5.98% in the last week of February but rose sharply, reaching 6.11% last week, according to Freddie Mac.
Rates are expected to continue rising this week, even as the Federal Reserve is expected to keep interest rates unchanged at its policy meeting this week, as renewed fears of inflation cast doubt on the central bank’s ability to cut rates in the near future.
“Besides the levels, a long-term oil shock will worsen already weak consumer sentiment,” Berner said. “Before the war, things were going well for homebuyers this spring as prices fell, property values rose, and mortgage rates finally broke the 6% threshold.
Despite those positive signs, existing home sales have lagged in January and February compared to 2025, as fragile consumer confidence continues to weigh on demand.
“Now, they’re less confident, and as they feel the pinch at the pump and see prices rise across all sectors of the consumer economy, they’re going to feel more inclined to take new money at a higher rate,” Berner said.
Although fuel costs 3%-4% of the average household’s monthly budget, fuel prices are a strong indicator of inflation in part because they are trumpeted on road boards.
Also, long-term increases in gas prices are spreading throughout the economy, as they increase the cost of transporting groceries, clothing, and other consumer goods shipped by truck.
Finally, homebuilders who are already struggling with high labor and material costs may also feel shortchanged.
“In the medium to long term, rising transportation costs will come down to builders having to pay more for materials, and that upward cost pressure will lead to fewer homes being built and at higher prices,” Berner said.
Despite growing concerns about the war’s impact on home buyers, mortgage applications rose last week, according to a weekly survey by the Mortgage Bankers Association.
Purchase orders were up 7.8% from a week earlier, on a seasonally adjusted basis, and up 11% from the same week a year ago.
February data on pending home sales, a leading indicator of March closings, will be released on Tuesday and will provide another important signal about the strength of the spring housing market.
