I have had a lot of conversations lately about how wars or global conflicts impact mortgage rates. Most people who follow markets closely understand that when uncertainty spikes around the world, investors tend to move into safer assets like US Treasuries. Usually, this helps rates. But that is not always the case, and recent events highlight why.
War, Uncertainty, and Mortgage Rates
Typically, global uncertainty caused by wars or conflicts boosts demand for safe investments like US Treasury bonds. More demand for bonds pushes their prices up, and when bond prices go up, interest rates go down. At least, that is how the textbook explanation goes.
But as we saw with Russia and Ukraine, the textbook does not always hold true. First, rates dropped as expected. Then they shot higher, driven by fears about inflation from disruptions to global energy markets.
The Oil Price Factor and Recent Surprises
Recently, many market watchers braced for a similar scenario due to another global conflict and its potential impact on oil prices. We expected oil prices to spike significantly, potentially triggering another jump in inflation fears. But it did not happen. Over the weekend, oil prices barely moved. And bonds, surprisingly, did not respond at all initially.
Now, as the market digests the latest news, bonds are actually gaining strength. Part of this strength is coming from reports that no radioactive contamination occurred following recent attacks, reducing some market fears. Another part is from unrelated news, specifically dovish comments made by Fed official Michelle Bowman, suggesting she may support a July rate cut.
What This Means for You
The bottom line is that market reactions, especially to global events, are not always straightforward. Bonds and mortgage rates do not always behave predictably in response to global uncertainty or conflicts.
That is why it is important to work with a mortgage professional who stays on top of these market shifts. At Better Rate Mortgage, we keep our finger on the pulse so you do not have to.
Sean Zalmanoff June 23, 2025
