The Middle East Conflict, Oil Prices, and Your Markham Mortgage — What’s Actually Going On

You may have noticed that your gas prices are higher, that the Bank of Canada keeps mentioning geopolitical uncertainty in its rate announcements, and that the real estate market feels stuck in a holding pattern. These things are directly connected — and understanding the chain of causation helps Markham buyers and sellers make better decisions.

Michael John Lau, a top real estate agent in Markham Ontario, is breaking down the real relationship between what is happening in the Middle East and what it means for your mortgage and your Markham home.

The Mechanism — How the Middle East Affects Your Mortgage Rate

The Bank of Canada noted the Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide.

The Bank said it is “looking through” the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation, and stands ready to respond. “Looking through” means treating the spike as temporary — assuming oil normalizes toward US$75/barrel rather than staying elevated. This is a judgment call with real uncertainty: if the conflict extends and keeps oil above $90–$100/barrel, the Bank’s patience evaporates and a hike becomes more likely.

What This Means for Markham Fixed vs. Variable Decisions

Fixed mortgage rates are priced off Government of Canada 5-year bond yields. When inflation expectations rise — as they do when oil spikes — bond investors demand higher yields, and higher yields mean higher fixed rates. This is the specific mechanism by which the Middle East conflict threatens to push Markham’s fixed rates higher. If oil stays elevated and the “looking through” posture becomes a hike — or bond markets merely price a higher probability of one — the 4.3% to 4.8% fixed window available today begins to close.

Variable rates are tied directly to the overnight rate. A 0.75% hike would push a $900,000 variable mortgage at Prime minus 0.75% (currently 3.70%) up to 4.45% — about $550 more per month.

The practical guidance from Michael John Lau: the geopolitical uncertainty suppressing buyer activity in Markham’s 2026 market is real — but finite. Conflicts resolve. Oil normalizes. The tightening bias dissipates. Buyers who act during the uncertainty window consistently outperform those who wait for resolution — because by the time the resolution is visible to everyone, prices have already adjusted upward and the opportunity has closed.

The Oil Price Opportunity for Canada — The Flip Side

Canada is a net oil exporter. Higher global oil prices benefit Canada’s energy sector, strengthen the Canadian dollar relative to oil-importing trading partners, and improve federal and provincial fiscal positions. A sustained period of higher oil revenue supports government spending on housing programs — including the HST rebate and the Canada Secondary Suite Loan Program — that directly benefit Markham buyers and homeowners.

The Middle East conflict is bad news for global growth and inflation. But it is not uniformly bad news for Canada — and understanding that nuance gives Markham buyers and sellers a more complete picture of the environment they are navigating.

Frequently Asked Questions

How do oil prices affect my Markham mortgage?

Higher oil prices drive inflation, which prevents the Bank of Canada from cutting rates and pushes Government of Canada bond yields up. Since fixed mortgage rates are priced off the 5-year bond yield, oil-driven inflation can push Markham fixed rates higher.

Should I lock a fixed mortgage rate now in Markham?

If oil prices stay elevated and inflation expectations rise, fixed rates (currently 4.3–4.8%) could climb as bond yields rise. Locking a 5-year fixed protects you against that upside, while staying variable leaves you exposed. The right choice depends on your risk tolerance.

Is the Middle East conflict bad for Canada's economy?

It's mixed. It's bad for global growth and inflation, but Canada is a net oil exporter — higher oil prices benefit Canada's energy sector, strengthen the dollar, and improve government fiscal positions that can fund housing programs benefiting buyers.