Rising energy prices and Middle East turmoil could push mortgage rates higher
US Treasury yields surged higher at the start of the week as an oil-price spike and renewed conflict in the Middle East outweighed the market’s usual rush into safe assets, raising fresh questions for mortgage lenders and borrowers.
Instead of the usual flight to quality, Treasuries fell across the curve as reports of more conciliatory messages from both the US and Iran cooled demand for haven assets, even though tensions stayed high.
Ten‑year yields, which briefly touched an 11‑month low near 3.92%, later climbed seven basis points to around 4.034%, with 30‑year yields also up five basis points to 4.68%.
That backdrop fed directly into Federal Reserve expectations. Traders still priced in rate cuts later in the year, with CME FedWatch tool pointing to a strong chance that policy would stay around 3.5%‑3.75% by mid‑March.
More data ahead
At the same time, investors are waiting for key data later in the week – the February jobs report, January retail sales, February unemployment, plus the ISM manufacturing and ADP employment figures – all of which could influence the Fed’s next policy statement.
US 10‑year yields serve as a key reference for long‑term borrowing costs. Rising Treasury yields threaten to slam the brakes on the steep decline in mortgage rates when geopolitical or trade shocks hit.
Still, some analysts emphasized that the relationship between conflict headlines and rates have weakened.
“Those headlines seem to have been helpful in steadying sentiment,” said Andrew Ticehurst, senior strategist at Nomura Australia Ltd. in Sydney. The Iran situation is key for now. Markets will look for clues regarding the likely length and severity of future military action, especially the Iranian response."
Others highlighted how inflation fears are blurring the traditional safety play in bonds.
“The ‘bond‑as‑haven’ trade becomes less clean if higher oil prices keep inflation pressures sticky,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore.
“It’s more about how sticky oil prices remain,” she said.
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