The war in Iran is rumbling on, raising the question of how long the financial markets will be disrupted by the conflict kicked off by US and Israeli strikes on Iran’s missile infrastructure, military sites and leadership in Tehran.
At the time of writing Donald Trump claimed “this war has been won”, but given his track record of being misleading with the truth we need verification before jumping to any conclusions. After all, Trump declared that talks were under way on Monday before Tehran denied that any discussions took place, leaving us in the dark. There are also fresh reports of Iranian attacks on Israel, Bahrain and Lebanon, so Iran doesn’t appear to be slowing down and negotiating.
Whatever is happening precisely, the longer the war goes on the longer oil prices are likely to elevate, which filters through to the rest of the economy. At the time of writing Brent crude oil futures stand at around $100 a barrel, up from around $70 at the start of the conflict.
The consequences are already being felt in the housing market. Lenders have begun withdrawing mortgage products and raising rates. The average two-year residential mortgage rate has increased from 4.83% at the start of March to 5.35% on Friday, while the number of available deals fell by nearly a fifth (19.5%) in a matter of days. Moneyfacts sardonically dubbed this process ‘Trumpflation’, given the effects of the conflict on the financial markets.
Indeed, economists now predict that the Bank of England will raise the base rate by 0.25% twice in order to curb the inflationary effects of this latest war, favouring savers rather than those looking to buy or invest in a home.
This uncertain economic landscape comes at a fragile time for the UK economy. Halifax calculated annual house price growth at 1.3% in February, while annual wage growth slowed to 3.8% in the three months to January. Unemployment also ticked up to a 5-year high of 5.2% in the final three months of 2025.
The key issue is duration. A short conflict would likely produce temporary volatility, though a longer one risks causing higher inflation, tighter monetary policy and weaker growth across the global economy. In that scenario the housing market would be more affected.
From now, uncertainty remains the defining feature, reflected by the actions mortgage lenders have already taken.