Iran Risk Reignites and NATO Boosts Defence Spending: The Fallout of Rising Long-Term Bond Yields

Published Thursday, July 9, 2026 · Rates, market figures and outlooks in this article reflect its publication date and may differ today. Ask us for the latest picture. Translated from the Korean original.

On Tuesday, news that the ceasefire between the U.S. and Iran had ended sent international oil prices soaring, and at the NATO summit member countries resolved to substantially increase defence spending, sending global long-term government bond yields higher across the board. With two major macro headwinds overlapping, inflationary pressure and massive government bond issuance, rate volatility in the Canadian mortgage market has also increased significantly.

Key Points

• Iran war risk resurfaces: After U.S. remarks voiding the ceasefire, international oil prices including Brent crude jumped more than 8%, reigniting global inflation concerns.
• Sharp increase in NATO defence spending: At the recent Ankara summit, allies including Canada agreed to significantly raise defence spending to 4–5% of GDP.
• Pressure from large-scale bond issuance: With governments expected to flood the market with bonds to fund huge defence budgets, concerns about an oversupply of bonds are driving global long-term bond yields sharply higher.
• Spreading market anxiety: Concerns about rates staying higher for longer sent North American stock markets sharply lower, and upward pressure on yields intensified in bond markets, including the Government of Canada 5-year bond.

What It Means

Long-term rates, which had dipped temporarily, are again under upward pressure due to 'renewed inflation concerns' from the oil price spike and expectations of 'massive government bond issuance' to fund defence spending. When a large volume of government bonds is released into the market, bond prices inevitably fall and yields rise, and Canadian fixed mortgage rates, which move closely with them, are now more likely to face additional upward pressure.

If you have a mortgage renewal coming up or are planning financing for a new home, we recommend moving away from vague hopes of falling rates and carefully re-examining a conservative, safe financing plan that fully accounts for external volatility.