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Markets don't wait for certainty. When U.S. and Israeli strikes hit Iran on March 1, 2026, global markets responded within hours: oil surged, stocks fell, bond yields climbed, and the word inflation was back on every trader's screen. For apartment investors, the instinct may be to brace for impact. But the full picture is more nuanced and in several ways, points toward multifamily as one of the more resilient corners of the market.
Here's what happened, what it means, and how we're thinking about it at Faris Capital Partners.
On March 1, 2026, the United States and Israel carried out coordinated strikes on Iranian military and nuclear infrastructure. Iran retaliated, and Tehran threatened to close the Strait of Hormuz, the narrow waterway through which roughly 20% of the world's oil supply passes (Reuters, Cushman & Wakefield).
The market reaction was swift:
Investor takeaway: This is a genuine macro shock---not a blip. Whether it's temporary or sustained depends on how the conflict evolves. But the transmission channels to real estate are already active.
Oil isn't just gasoline. It's embedded in construction materials, freight and logistics, utilities, and consumer goods. When oil spikes, inflation spreads:
Investor takeaway: Inflation driven by energy shocks is supply-side, it doesn't directly hurt apartment NOI the way a demand recession does. In fact, it can support rents as residents' purchasing power shifts toward necessities like housing, and away from discretionary spending.
In simple terms: When gas and groceries get more expensive, people cut back on big purchases, including buying homes. But they still need a place to live, so they keep renting. That steady rent demand is good for apartment owners.
Here's the most direct benefit for apartment investors: higher mortgage rates keep would-be homebuyers in the rental pool longer.
We covered the Fannie/Freddie conservatorship story in our February 19 issue. That was already nudging rates higher. Now add an oil-driven inflation shock, and the mortgage rate picture gets even more challenging for buyers:
Each uptick in mortgage rates prices another cohort of would-be buyers out of the for-sale market and into the rental market. That's a direct tailwind for well-run, attainable apartments that feel "house-adjacent" without the house-sized payment.
Investor takeaway: Our target renter isn't choosing between a luxury apartment and a luxury home. They're making a practical decision based on what they can afford. When homeownership becomes harder, that calculus favors quality rentals.
In simple terms: When it costs more to borrow money for a home, fewer people can afford to buy. So they rent instead, often for longer than they planned. That means more demand for apartments.
We've been writing all year about the supply reset already underway: completions are expected to fall to ~300,000 units in 2026, roughly half the 2024 peak. The Middle East shock accelerates that trend:
Less new supply is the single most powerful tailwind for existing apartment communities. When fewer new units come online, occupancy at stabilized properties improves, concession burn-off accelerates, and effective rents have room to grow.
Investor takeaway: The supply wave was already easing. A sustained energy shock tightens that further, particularly benefiting well-located, existing Class B communities in high-demand markets.
In simple terms: Building new apartments just got more expensive. That means fewer new ones will be built, which is good news for the apartments that already exist because there's less competition, so owners can maintain rents and keep units filled.
Not all real estate responds to geopolitical shocks the same way. Cushman & Wakefield's March 2, 2026 analysis put it plainly: "CRE fundamentals have recently proven resilient through geopolitical shocks, and are likely to do so again."
Multifamily has a structural advantage in moments like this:
Per AAA Storage Investments' analysis of the Israel-Iran conflict's real estate impact: "Higher debt cost 'won't help new development, but less new development won't hurt multi-family as a sector, really, because it's coming out of an overbuilt state right now.'" Multifamily, they concluded, "retain[s] their defensive edge."
Investor takeaway: In a risk-off environment, capital tends to move toward simple, cash-flowing assets with predictable NOI. That describes well-operated multifamily.
In simple terms: Apartments are considered one of the safer places to invest during uncertain times. People always need somewhere to live, and rents can adjust with inflation, which gives apartment owners a built-in cushion that many other types of real estate don't have.
ING's macro team framed the conflict in two paths, which maps directly to real estate planning:
Scenario 1: Short conflict, temporary oil spike. The strikes exhaust fixed military targets quickly, de-escalation follows, and oil fades from highs. In this case, the inflation scare passes, mortgage rates ease somewhat, and the broader macro trajectory—slow growth, easing supply, steady rents—continues. Apartment fundamentals improve in line with our base case.
Scenario 2: Prolonged conflict, sustained energy disruption. Strait of Hormuz disruptions persist, oil remains elevated, inflation proves sticky, and the Fed holds or raises rates. In this case, homebuying becomes even less accessible, the rental pool grows, new construction gets further suppressed, and attainable, well-run apartments become the practical choice for a larger share of the population.
In both scenarios, our positioning benefits. The key difference is the magnitude—not the direction.
Investor takeaway: We don't build our business plans around a single macro outcome. We underwrite conservatively, and let multiple tailwinds—supply easing, mortgage rate pressure on homeownership, inflation-linked rents—do the work across scenarios.
In simple terms: Whether this conflict is short or long, the effect on apartments is likely positive—more renters, less new competition, and rents that can keep up with inflation. We plan for both possibilities, but either way, our strategy makes sense.
War in the Middle East sent oil prices sharply higher, which scared stock markets and raised fears that everyday costs—gas, groceries, construction—will go up. For apartment investors, that's actually a mixed-to-positive story: higher costs make homebuying harder, so more people rent longer. At the same time, rising construction costs mean fewer new apartments get built, which reduces competition for existing properties. Well-run, fairly priced apartments in strong job markets tend to hold up well and may even benefit when the world gets uncertain.
👉 If you’d like to be added to our investor list to see future opportunities like this one, please schedule a call with our team.
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