Silver Price Outlook: XAG/USD Slides Toward $57.00 as Middle East Geopolitical Risks Intensify

Silver remains under pressure as escalating US-Iran tensions in the Strait of Hormuz drive oil prices higher, raising concerns that the Federal Reserve may keep interest rates elevated for longer. Softer-than-expected June CPI and PPI data have helped ease near-term rate-hike concerns. Meanwhile, markets have reduced the probability of a September Fed rate increase to 44%, although the impact of recent military developments has yet to be fully reflected in asset prices.

Silver (XAG/USD) extends its decline for a second consecutive session, trading near $57.00 per troy ounce during Thursday’s Asian session. The precious metal remains under pressure as escalating tensions between the United States and Iran drive oil prices higher, raising inflation risks and reinforcing expectations that the Federal Reserve could maintain elevated interest rates for longer.

According to reports, the US Central Command (CENTCOM) launched additional operations aimed at keeping the Strait of Hormuz open, a critical route for global energy supplies. In a significant escalation, US forces reportedly targeted an oil tanker in the strategic waterway, heightening concerns over further disruptions to oil markets. Meanwhile, President Donald Trump declined to provide a timeline for potential future actions against Iranian infrastructure, adding to geopolitical uncertainty.

Despite these developments, investors are also weighing softer US inflation data. Consumer inflation eased to 3.5% year-over-year in June from 4.2% in May, coming in below the consensus forecast of 3.8%. The weaker CPI reading initially reduced expectations of an imminent Fed rate increase.

Producer inflation data reinforced the disinflationary trend. The annual PPI rate slowed to 5.5% in June from 6.0% previously, missing expectations of 6.2%, while monthly PPI fell 0.3% after a 0.6% rise in May, outperforming forecasts for a flat reading.

As a result, market expectations for a September Fed rate hike eased, with implied odds declining to roughly 44% from 50% a day earlier. However, analysts note that June inflation figures do not yet reflect the economic consequences of the renewed US-Iran conflict, leaving markets cautious about the potential inflationary effects of the latest military escalation.