Will the “safe dollar route” hit your mortgage? The Iran-Israel-U.S. conflict is already shaking your wallet
The reaction so far has been muted in markets after the US strike on Iran’s nuclear facilities as the world awaits how Iran will answer the aggression.
The conflict in the Middle East escalated on Saturday after the United States joined Israel in attacking Iran. The US Air Force carried out strikes on three of the Islamic Republic’s nuclear facilities to stop uranium from being enriched.
US President Donald Trump said that the sites were “completely and totally obliterated.” In response, Iran continued its volley of ballistic missile strikes on Israel but has yet to take any direct action against the US which it has vowed to do.
The Iranian parliament voted to close the Strait of Hormuz, a vital shipping route for global oil supplies in the Persian Gulf, but Iran hasn’t done so yet. The Islamic Republic’s Foreign Minister Abbas Araqchi said that his country is considering all possible responses.
Markets take the escalation in the Iran-Israel-U.S. conflict in stride
While the world awaits what will come next, for the time being reaction from the markets has been muted. Oil prices barely moved on Monday, falling slightly compared to a $10 spike after Israel commenced its attacks on Iran.
Likewise, interest rates on US 10-year Treasury notes declined. The value of the US dollar hasn’t seen much of a swing in the aftermath of the US strikes.
The greenback has been facing headwinds due to turmoil from Trump’s tariff policy but is generally seen as a safe-haven asset along with gold during prolonged and escalating conflicts Juan Perez, director of trading at Monex USA in Washington told Reuters at the start of the Israel-Iran conflict on 13 June. “It’s a bit of a psychological reaction,” he said.
The main Wall Street indexes saw a bump into positive territory as investors reacted positively to the reaction so far in the wake of the escalation. Part of this could be due to the fact that the US military operation took place on a Saturday night giving investors a day to digest what had happened and that Iran didn’t immediately take any direct action against the “Great Satan.”
Will the conflict affect mortgage rates in the US?
The situation is still developing and “there is a plethora of potential ramifications,” said Christopher Hodge, Chief US economist at Natixis speaking to Reuters. “But it appears as if the strikes were targeted, discreet, and discriminating. If so, and if the oil exporting capacity of Iran has not been compromised, then the economic fallout should be contained,” he added.
He went on to explain that “a short-term pop in oil prices will be viewed by the Fed less as a factor that increases input costs and feeds through to inflation than it will be as a tax on consumers that suppresses demand.”
“I wouldn’t expect this to factor into the Fed’s decision calculus unless the spike in oil prices is sustained,” he reckoned.
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