Portland Mortgage Market Update — March 6, 2026

Remember a couple weeks back when I mentioned there was concern about a war with Iran? I believe I said something along the lines of "in short-term conflicts there is a flight to safety where foreign investors buy US debt instruments which would drive rates down. However, if there is a protracted conflict that impacts oil supplies that could reverse and rates worsen as local oil prices rise causing inflation". Well we started bombing Iran early Saturday morning and by market opening on Monday investors realized this was not going to be a "short-term conflict". Rates worsened significantly Monday morning and investors steadily lost what scant optimism they had throughout the week.

Why is this war so particularly hard on the market? It all comes down to inflation. Speaking in broad strokes here- there is a TON of oil that comes out of that area, and all of it gets loaded onto ships that have to travel out of the Persian Gulf through the Strait of Hormuz. This strait is a "pinch point" that would not be too difficult to shut down. If Iran shut it down, either by dropping mines or torpedoing/ firing missiles at crossing ships, about 20% of the world's oil would dry up, which means gas prices explode and EVERYTHING gets more expensive to ship. So, we are worried about seeing another spike in inflation, just when we thought we had that handled. The Fed already has rates elevated while the labor market is softening, and if inflation gets too out of hand we run the risk of entering stagflation. Stocks and Bonds are weakening as a result of this threat, and Treasury yields spiked which led to the increase in mortgage rates. Last Friday rates were the best they had been in 3 years. Today they are back to where we ended 2025, basically undoing all the progress we have made so far.

Speaking of the Labor Market, we got the most recent BLS jobs report today and it was not good. It showed payrolls dropped by 92,000 in February and if you know anything about these BLS reports, you know in the coming revisions that number is going to get worse. Unemployment increased to 4.4%, and usually this would help support mortgage rates but oil prices spoked today as Trump said there won't be an end to this war without an "unconditional surrender" from Iran. Rates tried to rally on the lower jobs numbers but ultimately succumbed to the fear of higher oil prices.

There is room for optimism though- Treasury Secretary Scott Bessent announced that the US will make a "series of announcements" to support oil trade, and just this morning they eased sanctions on Russian oil sales. There will likely be more coming out soon where oil from different sources becomes more readily available for the global market, which would ease fears and bring oil prices back down. In doing so, Treasury yields will likewise drop which should bring mortgage rates back down. Historically speaking, this has been the case with all of our most recent engagements in the Middle East—there is a temporary spike to oil prices as the market runs in fear, then prices settle down as calmer heads prevail and more access to the commodity is made.