As of early March 2026, with US and Israeli strikes on Iran under way, the short answer for Canadian homeowners is this. Fixed mortgage rates move with bond yields, and war usually pushes yields down. But the drop only reaches your rate if the conflict lasts. A short war changes almost nothing.
I am Moe Asgarian, a real estate broker in Toronto, and I get this question from clients every time the news turns. Before the market part, condolences to every family that has lost someone in these days, including the ordinary citizens who lost their lives.
Fixed mortgage rates in Canada follow bond prices
Fixed rates in Canada are set off bond prices, so if you can see what a conflict does to bonds, you can read most of what it does to fixed mortgages. The first thing to hold on to is that bond yields and bond prices move in opposite directions. When the price of a bond goes up, the return you can earn from it goes down.
History is fairly consistent here. In past conflicts, bond yields fell, and fixed mortgage rates followed them down. The mechanism is simple. Once fighting starts, investors step back from risk and move into safe places, and US Treasury bonds are the classic safe place. More buyers, higher prices, lower yields, lower fixed rates.
What the 12-day war showed
We watched exactly that during the 12-day war. Yields rose briefly at the start, then fell hard. During that 12-day war the yield fell roughly 20 basis points, about 0.2%, within two weeks, and the yield on five-year Government of Canada bonds came down with it.
Then the war ended, and yields went back up. The whole episode was too short for the decline to work its way into fixed mortgage rates, so in practice Canadian borrowers saw no change at all. That is the lesson to carry into March 2026. A longer campaign has a far better chance of actually moving fixed rates, and even then it takes roughly three to four weeks before you would see any of it.
The longer example: the Iraq war in 2003
For a longer conflict, look at the Iraq war in 2003. Two things happened at once. Investors crowded into US bonds because the investment climate felt unsafe, and during that 2003 conflict the yield on US bonds fell by around 30 basis points. At the same time the war dragged on, oil prices climbed, and rising oil pushed those same yields back up.
The two forces cancelled each other out, and fixed rates in Canada did not climb as much as had been predicted in 2003. That is the honest template for 2026. Two opposite pressures, and the net result depends on which one runs longer.
There is also a factor that has nothing to do with the war. Even with no conflict at all, Ottawa has a budget to fund, with infrastructure and construction spending behind it, and to pay for it the government has to sell bonds and borrow. Economists agreed that this alone would push fixed rates up. As of early March 2026 that pressure had not disappeared. It sits underneath the war story and pulls the other way.
Variable rates, oil, and the Strait of Hormuz
Variable mortgages are tied directly to the Bank of Canada policy rate, so the inflation story matters more there. Oil prices were climbing sharply in early March 2026. Iran had threatened to close the Strait of Hormuz, which carries about 20% of the world's daily oil and energy supply. Canada produces oil and has put extra barrels into the market, but as of early March 2026 that surplus was only about 1%, roughly 250,000 extra barrels a day.
Expensive oil means expensive gasoline, and expensive gasoline raises the cost of moving every good in the economy. As of early March 2026, Tiff Macklem said the Bank of Canada intends to control inflation in any economic condition, and that if inflation starts to rise even in a disordered economy, he would raise the policy rate to stop it. The Bank's next meeting was March 18, 2026, and nothing dramatic was expected for the policy rate there, which means variable rates unchanged. The meeting after that was at the end of April, around April 29, 2026.
What I tell Toronto clients while this plays out
Nobody knows how long this lasts. Several things could change the arithmetic quickly. Iran could close the Strait of Hormuz completely and strike exports from the Persian Gulf states. There could be a heavy attack on a residential area in Israel or a neighbouring country. US ground forces could enter the fight. As of early March 2026 none of those had happened, and each one would move oil prices and bond yields in a way that rewrites the forecast above.
What I keep telling clients is that these shifts are rarely instant. I do not expect the Toronto housing market to change sharply or suddenly because of this war. Read the bond yields rather than the headlines, and give any move three to four weeks before you judge what it did to fixed rates. Events are moving fast, and this is written as of early March 2026.
If you want to talk about how your mortgage renewal or your purchase plan fits into this, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.
Frequently asked questions
Does war lower fixed mortgage rates in Canada?
Usually it pushes them in that direction. Investors move into safe assets such as US Treasury bonds, bond prices rise, yields fall, and Canadian fixed mortgage rates, which are set off bond prices, follow. The catch is timing. It takes roughly three to four weeks for a yield drop to show up in fixed rates.
Why did fixed rates not change during the 12-day war?
During the 12-day war the yield did fall, by around 20 basis points within two weeks, and the yield on five-year Government of Canada bonds came down with it. But the war ended quickly, yields went back up, and the decline never lasted long enough to reach fixed mortgage rates.
What happens to variable mortgage rates if oil prices rise?
Variable rates track the Bank of Canada policy rate, which responds to inflation. Higher oil means higher gasoline and higher transport costs across the economy. As of early March 2026, Tiff Macklem said the Bank intends to control inflation in any economic condition and would raise the policy rate if inflation began to climb.