Oil, Iran, and why mortgage rates just hit a 15-month high

It was a rough week for anyone hoping rates would ease. Escalating conflict between the U.S. and Iran sent oil prices surging, bond yields followed, and mortgage rates climbed to their highest level in 15 months -- even as the Treasury Department stepped in with its biggest buyback yet to try to slow the bleeding.

01The Iran war premium is back in oil

The U.S. and Iran traded strikes again this week, with U.S. forces hitting Iranian oil tankers linked to the Revolutionary Guard and Iran firing on U.S. Navy assets in response. Traffic through the Strait of Hormuz -- the chokepoint for roughly a fifth of the world's oil -- has slowed to a trickle as a result. Brent crude jumped more than 3% to around $101 a barrel, its highest close since May, and that matters well beyond the pump: energy prices feed directly into inflation, and inflation is the thing keeping the Fed from cutting rates.

Treasury Secretary Scott Bessent tried to push back against rising yields this week, announcing the department would triple its buyback of longer-dated Treasuries to $6 billion -- double the $4 billion floor he'd previously committed to, though short of the $10 billion some desks had penciled in. Bessent paired the move with a pointed warning to currency traders betting against the yen: “I am the house now,” he said, framing the Treasury's coordinated intervention with Japan as a signal it has the upper hand. So far, the market hasn't been convinced -- yields kept climbing even after the announcement.

02Jobs data is sending mixed signals -- but hike odds keep climbing

ADP's weekly hiring tracker showed private employers adding an average of 12,000 jobs a week over the four weeks ending August 22, up modestly from 11,750 the period before -- a pace that works out to roughly 48,000 jobs for the month, still soft by historical standards. That's a notably cooler read than August's official jobs report, which blew past expectations and reignited talk of a Fed rate hike rather than a cut.

With no major data releases mid-week, the next real test comes today with the Producer Price Index and jobless claims, followed by Friday's Consumer Price Index -- the last significant inflation read before the Fed's meeting. A hot print on either could push hike odds higher still.

03Mortgage rates hit their highest level since June 2025

All of that filtered straight into mortgage pricing. MBA's weekly survey showed the average 30-year fixed rate rising to 6.85% for the week ending September 4, up from 6.79% the week before and 36 basis points higher than the same week last year. Total mortgage applications fell 2.7% as a result.

Purchase demand is holding up better than refis, which makes sense -- buyers who need to move, move regardless of rate, while refi activity is far more rate-sensitive and has now pulled back to its slowest pace in over a year. For clients sitting on higher-rate mortgages who still want access to equity, cash-out refinancing and HELOCs remain worth a look even in this environment -- just don't expect a rate-and-term refi to pencil out until rates ease.