US and Iran Sign Peace Deal, US Fed Holds Rates

June 15, 2026

The US and Iran have finally signed an agreement which is expected to reopen the Strait of Hormuz, the crucial energy chokepoint whose effective closure has lead to higher oil prices and increasing the chances of higher interest rates in many countries including Canada. Sanctions on Iranian crude will also be waived, helping to get more oil out on to the markets.

Mediators of the deal say that it takes immediate effect. This raises the prospect that massive amounts oil will begin immediately flowing out of the Middle East and in to global markets. However, it may not be that straightforward. 

Well over 100 ships would transit the strait everyday prior to the war, so there is expected to be a significant backlog upon reopening. Furthermore, there will be increased demand for energy for the foreseeable futures as countries race to fill their strategic reserve and insulate themselves from any future shocks. Notably, The United States Strategic Petroleum Reserve is currently at its lowest level in 43 years. One must also consider that it takes weeks for Persian Gulf energy to reach some of its markets in Asia, where it receives the most demand. 

So what does this mean for Canada and mortgage rates?

The good news is that consumer sentiment should rebound as there is a widespread belief that the global economy will return to normal, albeit slowly. Crude oil prices have already dropped below $75, after nearing $120 at one point in April. This is already not far off of the $65 pre-war price. 

Bond yields, which are crucial determinant of interest and mortgage rates, will face downward pressure as oil prices and inflation decline and give the Bank of Canada (BoC) room to cut rates. However, upward pressure will come from the US Fed’s decision to hold rates on June 17th. 

So, the long-term prospects for Canada’s economy will be buoyed by the peace agreement, which has warded off spectre of a global recession. As for the short-term, it remains to be seen how quickly inflation will come down, so we can see how the BoC reacts at its next meeting on July 15th. Remember that the BoC currently has an incentive to both cut and hike interest rates, so it will be interesting to see what path they take.

Sources: CBC News, Reuters, Trading economics