Events in the Middle East can feel a long way removed from your monthly mortgage payment - but the connection between the two is more direct than most people realise. Since the escalation of conflict involving Iran in late February 2026, mortgage rates in the UK have risen sharply, lenders have pulled hundreds of products, and the outlook for interest rate cuts has changed significantly. This post explains why.

What happened and when?

On 28 February 2026, Israel and the United States launched military strikes against Iran. Iran responded with attacks on regional targets, including energy infrastructure across the Middle East. The immediate effect on financial markets was significant - oil prices jumped, inflation expectations rose, and the anticipated path of UK interest rate cuts was rapidly repriced by markets.

Within two weeks, the average two-year fixed mortgage rate in the UK climbed from around 4.84% to over 5.21%. The average five-year fix followed a similar trajectory. Major lenders including Nationwide, NatWest, HSBC, and Virgin Money all increased their rates, and around 472 mortgage products were withdrawn from the market in the space of just 48 hours as lenders paused to reassess their pricing.

So what does a conflict in the Middle East have to do with your mortgage?

The link runs through oil prices, inflation, and swap rates - and it is worth understanding each step in the chain.

Step 1 - oil prices rise

The Middle East is central to global energy supply. Roughly 20% of the world's crude oil passes through the Strait of Hormuz, between Iran and Oman. When conflict escalates in the region - particularly involving Iran - markets immediately price in the risk of supply disruption, even before any actual disruption occurs. Brent crude rose from under £58 per barrel before the conflict to over £72 within two weeks.

The UK imports around 44% of its energy, which makes it particularly sensitive to global price movements. When oil and gas prices rise, the effect feeds through quickly into domestic costs - fuel at the pump, energy bills, and the cost of goods and services as businesses pass on higher expenses.

Step 2 - inflation expectations rise

Higher energy prices push inflation up. Before the conflict, the Bank of England had been forecasting that UK inflation would fall back towards its 2% target through 2026. That picture changed rapidly. The Bank now expects inflation to remain between 3% and 3.5% in the second and third quarters of 2026 - significantly above what had previously been anticipated.

This matters because the Bank of England sets interest rates with the primary aim of keeping inflation under control. When inflation is higher than expected, the Bank is less likely to cut rates - and may even consider raising them.

Step 3 - rate cut expectations are repriced

Before the conflict, financial markets had been pricing in several Bank of England rate cuts through 2026, with many analysts expecting the base rate - currently 3.75% following six cuts during 2024 and 2025 - to fall further. Within days of the conflict escalating, those expectations reversed sharply. Markets moved from pricing in a high probability of a cut at the March 2026 Monetary Policy Committee meeting to a much higher probability of a hold - or even a rise.

This shift matters enormously for mortgage rates, because fixed rate mortgages are not priced off the current base rate - they are priced off where markets expect rates to be in the future.

Step 4 - swap rates rise and mortgage rates follow

Lenders set their fixed rate mortgage pricing using something called swap rates - financial instruments that reflect market expectations of future interest rates. When rate cut expectations are pushed back, swap rates rise. When swap rates rise, the cost to lenders of funding fixed rate mortgages increases, and they pass that cost on through higher mortgage rates.

The two-year swap rate and five-year swap rate both rose sharply in the first two weeks of March 2026, and lenders repriced their fixed rate products accordingly. This is why mortgage rates can move quickly in response to global events, even before the Bank of England has met or made any decision.

Gilt yields also played a role. UK government bonds - known as gilts - saw their yields rise sharply as investors revised up their inflation expectations. Rising gilt yields push up wholesale borrowing costs across the financial system, adding further upward pressure on mortgage pricing.

What does this mean if I am buying or remortgaging now?

If you are on a fixed rate deal that has not yet ended, your monthly payment is unaffected. Fixed rates lock your payment in for the duration of the deal, regardless of what happens in the wider market.

If you are coming to the end of a fixed rate deal or are currently on a tracker or standard variable rate, the picture is more complicated. Rates have risen from where they were just a few weeks ago, and the expected further cuts that many borrowers were banking on are now less certain.

If you are in the last six months of an existing deal, most lenders allow you to lock in a new rate now without paying early repayment charges - giving you the option to secure a rate before any further increases, while still being able to switch to a better deal if rates improve before your completion date.

Is this permanent?

Not necessarily. Mortgage rates respond quickly to changing expectations, and those expectations can shift in either direction. If the conflict were to de-escalate and oil prices were to fall back, inflation forecasts would be revised down, swap rates could ease, and lenders might reprice downwards again. The uncertainty cuts both ways.

What is certain is that the global picture is more volatile than it was at the start of 2026, and that getting proper advice - rather than waiting and hoping - is more important in this environment than it has been for some time.

How Aspect Mortgages can help

The team at Aspect Mortgages are independent whole-of-market advisers. We monitor rate movements across the market daily and can help you work out whether to act now or wait, depending on your specific situation and timeline.

To have a conversation about your options, call us on 01257 812345 or visit our mortgages page. There is no obligation and no cost to an initial chat.