Middle East conflict triggers oil surge and housing market downturn in 2026
Rising conflict in the Middle East has pushed up global oil prices and mortgage rates, prompting ANZ to revise its housing market forecast. The bank now expects house prices to fall this year, reversing earlier predictions of steady growth. Analysts warn that prolonged instability could deepen the decline. The crisis began in late February 2026 when tensions in the Middle East escalated sharply. Oil prices surged as Iran blocked the Strait of Hormuz, cutting off a key supply route. Brent crude jumped from around $72 per barrel on February 27 to a high of $120 in early March before settling near $104–106 by late March.
Higher oil costs have driven up wholesale mortgage rates, putting pressure on lenders to raise borrowing costs. ANZ had initially forecast a 5% rise in house prices for 2026, later adjusting it to 2%. Now, the bank predicts a 2% drop instead.
A swift end to the conflict might ease pressure on the housing market. But if the situation drags on, prices could fall even further. Household confidence is also expected to weaken as economic uncertainty grows. The shift in ANZ's outlook reflects broader economic strain from the Middle East conflict. Borrowers face higher interest rates, while homeowners may see property values shrink. The bank's revised forecast hinges on how long the disruption in oil supplies continues.
