Oil Surge = Rate Surge? Real Estate’s New Threat

Summer's heating up—and so is the pressure on the Fed! Honestly, 95% of the year I wonder why we live in Ohio… then a week like this hits with 90+ degree temps and suddenly Florida doesn’t sound so great. I don’t know how y'all Southerners survive this heat! Weeks like this make me a little more thankful for our Ohio seasons—sometimes.

It’s been another wild week out there, so let’s break down what it all means for the real estate world. Let’s gooo!

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Read time: ~5 minutes

Rates ended FLAT compared to last week, and volatility was LOW. Rates are now in the high 6% to low 7% range for most loan types without paying discount points. Paying discount points can get you in the mid/high 6's.

Explosions Abroad. Buckle Up for Volatility.

By now, most of us have seen the headlines—over the weekend, the U.S. bombed multiple Iranian nuclear sites. Definitely a scary situation, and like many of you, I hope this doesn’t escalate into something more devastating. These moments are always tough for Nick and me to talk about from a financial perspective, especially so soon after they happen. But at the end of the day, we understand you turn to us for insight on how these types of events can impact our local real estate and mortgage market—so let’s dive in! So, the big question is: What does this mean for mortgage rates?

In times of chaos and global tension, investors typically take their money out of riskier assets (stocks) and look for safer investments such as long-term bonds—which often leads to lower mortgage rates! Woohoo! But 2025 has been unusual, nonetheless. Despite major events last week—a Fed meeting, economic data drops, and political drama—mortgage rates have barely moved.

Now, the real wildcard is going to be Iran’s threat to close the Strait of Hormuz, a critical global oil passage. This body of water controls ~20% of the world's oil consumption. If that threat becomes reality, we could see oil prices soar, which is going to be bad news for us in the mortgage world 🙁 Soaring oil prices is going to reignite inflation fears and push mortgage rates higher for longer.

Oil Surge = Rate Surge? Real Estate’s New Threat

To give y'all perspective on today's situation, let's do a short rewind to one of the most impactful conflicts involving an oil-rich region: the 1973 oil crisis. It started with the Yom Kippur War, when several Arab nations attacked Israel. In response to U.S. support for Israel, OPEC hit back with an oil embargo—cutting off oil supply to the U.S. and others.

The result? Oil prices quadrupled almost overnight, triggering inflation and throwing the U.S. economy into complete chaos.

At the time, mortgage rates were about 7.4% in 1972. By 1974, they’d jumped to 9.1%, and they kept rising—eventually topping 18% in the early '80s. The spike in oil led to stagflation (high inflation + slow growth), and the Fed had no choice but to raise interest rates sharply, which dragged mortgage rates up with them.

Fast forward to now: if Iran follows through on its threat to close the Strait of Hormuz, it could send oil prices soaring once again. That would likely reignite inflation concerns and push the Fed to stay cautious—limiting rate cuts or even driving mortgage rates higher.

History doesn’t always repeat itself, but it often rhymes. We’ll be watching closely to see how markets respond in the coming days.

Fed Hits Pause Again — But for How Long?

The Fed wrapped up its fourth meeting of the year last Wednesday, and once again, left interest rates unchanged.

While that move was widely expected, Chair Jerome Powell is now really starting to feel the pressure. On one side, Trump is taking shots at “Too Late Powell” for not cutting rates. On the other, Bill Pulte—U.S. Director of Federal Housing—is calling for his resignation.

To be fair, inflation remains above the Fed’s 2% target, and the labor market continues to show strength—both reasons to hold steady on rates. But the backdrop is getting more complicated, with rising trade wars and a sudden escalation with Iran adding uncertainty.

The Fed still forecasts two rate cuts before the end of 2025, with four meetings remaining this year. However, expectations for 2026 have cooled, with only one cut now projected.

Despite the mounting political pressure, Powell has made it clear: no rate cuts until inflation is under control and job market weakness emerges. A potential spike in oil prices would only add fuel to inflation—and make it even tougher for those hoping for lower rates anytime soon. For now, we should all prepare for higher rates to stick around longer.

The Market Midpoint : What the First 6 Months Reveal About the Rest of 2025

Join Tommy Choi for a timely and data-packed conversation with Lawrence Yun, Chief Economist at NAR, as they unpack what’s happened in the first half of 2025. With real-time housing data and expert analysis, Dr. Yun will help you make sense of where the market’s been—and where it’s headed.

• The key economic signals shaping the 2025 market

• What current mortgage rates, inventory levels, and buyer/seller trends really mean

• How to adjust your strategy to stay competitive in Q3 and Q4

• Why now is a critical time for smart, informed action

Whether you're advising buyers, sellers, or just trying to stay ahead of the curve, this is the midyear check-in you can’t afford to miss.

The FREE webinar takes place Tuesday, June 24th from 2-3PM.

You already know Nick and I will be digesting everything during this month’s Top Agent Masterclass with our boy Tommy. Join us!

Instagram Reels from the Week

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Don’t hesitate to reach out if you need anything at all. Have a wonderful week!