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The bigger picture
Yesterday was bad for mortgage rates as three oil-supply choke points in the Middle East and Russia were closed. Brent crude, the benchmark for global oil prices, burst back through the $100-a-barrel mark before falling back a little overnight.
Besides the Strait of Hormuz blockade, the Houtis, Iranian allies based in Yemen, have effectively closed off the southern end of the Red Sea, which Saudi Arabian tankers had been using to bypass holdups in the Strait. Meanwhile, Ukrainian drones have deterred shipping from the Kerch Strait and adjacent Sea of Azov. Altogether, these are choking off about 25% of the world's pre-war oil supply.
Meanwhile, yesterday evening, the U.S. hit more than 80 countries with tariffs. That might contribute to another rise in mortgage rates today.
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What's coming up?
Although economic reports are usually the main drivers of changes to mortgage rates, they're not the only ones. The general mood in markets and economically consequential news can also affect those rates. News items concerning the war, employment, inflation, tariffs, and deficit funding are especially influential at the moment.
The Fed
The Federal Reserve's rate-setting body (the Federal Open Market Committee or FOMC) is due to conclude a two-day meeting next Wednesday. It's an opportunity for the FOMC to hold general interest rates steady or to increase them.
A week ago, the CME FedWatch tool put the chances of the committee hiking general rates at just 11.8%. By yesterday evening, the chances had risen to 34.7%. That's not good for mortgage rates and likely reflects rises so far this week.
The Fed doesn't directly set new fixed-rate mortgage rates. But the factors that influence its decisions (and to a lesser extent the decisions themselves) certainly do move those rates.
May's price indices (the CPI, PPI, IPI and PCE) tend to lend weight to pessimistic arguments about future inflation rates. And those reports landed either side of the last meeting of the FOMC on Jun. 16-17.
The minutes of that meeting were released on July 7, and Barron's reported that day:
"The minutes from Kevin Warsh’s [the new Fed chair's] first Federal Reserve policy meeting contained few surprises, but underscored how divided policymakers remained over the path of interest rates. That could be a sign the Fed will stay on hold for longer."
"Nine policymakers penciled in at least one rate hike by the end of the year, according to the Summary of Economic Projections released in June, continued Barron's. "Eight officials expected no changes to the benchmark rate, while only one official believed the committee would implement a rate cut by the end of the year. Warsh declined to provide projections."
The minutes themselves revealed: "Most participants remarked on scenarios in which inflationary pressures would dissipate and inflation would soon begin to return to 2 percent. In such scenarios, almost all of these participants noted that it would likely be appropriate to maintain or eventually lower the target range for the federal funds rate. Most participants, however, also pointed to scenarios in which, in the context of stable labor market conditions, inflation would remain elevated due to strong AI-related demand, the conflict in the Middle East, or the effects of tariffs. In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted to return inflation to 2 percent."
In this context, "policy firming" very likely means one or more hikes to general interest rates this year.
Read Could the Fed Really Raise Interest Rates Next Week? for reasons long delays in reaching a peace settlement with Iran could drive oil prices, inflation and mortgage rates much higher.
Bond markets vs. stock markets
Mortgage rates are largely dictated by the yields on a type of bond, the mortgage-backed security (MBS). So, we focus on bond markets.
On May 7, The New York Times explored why stock markets and bond markets have been behaving so differently from each other since the start of the conflict in the Middle East.
Investors in stocks have been wagering that U.S. companies will continue to generate large profits during the conflict. And the stock market typically cares only about whether dividends and company values will continue to rise.
"But the bond market is another matter," said The Times. "Bond traders have maintained a much sharper focus on risk. Yields remain correlated with shifts in the price of oil. As oil prices have spiked and inflation has risen, yields have risen and bond prices, which move in the opposite direction, have fallen."
Comerica Bank's weekly preview
On Monday, Comerica Bank published its weekly preview:
"New home sales [due Friday] are the most important economic release in this light week for macro data. Sales likely rebounded in June after May’s drop, but were still down nearly 10% from a year earlier. 2026 has become another disappointing year for new home sales as high mortgage rates shrink the pool of potential buyers. The median new home price likely fell modestly from a year earlier after holding unchanged in May.
"The flash [aka preliminary and subject to change] release of S&P Global’s manufacturing PMI survey for July [also due Friday] is forecast to show modestly slower growth as customers added less to inventories. The services PMI likely edged down, too, as the re-escalation of the Iran conflict weighed on new orders. The surveys will likely report that input-price inflation picked up from June as prices rose for crude oil, gasoline, diesel, jet fuel, and other refined products."
Comerica Bank's previews don't always match up with market expectations, which are based on the consensus forecasts of a wider pool of analysts.
Mortgage rates today
There are three economic reports on today's MarketWatch economic calendar. While we doubt they'll grab investors' attention, here's what markets are expecting from each:
- July's S&P Global manufacturing PMI — Markets expect an index of 54.4, down from June's 55.7
- July's S&P Global services PMI — Markets expect an index of 51.5, up from June's 51.3
- June's new home sales — Markets expect an annualized 606,000 homes sold, up from May's 580,000
Typically, mortgage rates fall when economic data disappoint market expectations and rise when figures exceed those expectations.
What's next?
This week is a very slow one for economic reports. The ones most likely to affect mortgage rates are due tomorrow, but even they don't typically have a noticeable impact.
Events in the Middle East over the last couple of weeks might push mortgage rates appreciably higher if the renewed conflict is not swiftly resolved. That's because a prolonged closure of the Strait of Hormuz could again choke off 20% of the world's oil supply, putting additional pressure on gas, diesel and many other prices.
Next week brings more and more important economic reports, culminating in Thursday's PCE price index, which is the Fed's favorite gauge of inflation.
