Silver prices (XAG/USD) continued to trade lower for the second consecutive day, holding near $76.90 per troy ounce during Asian trading hours on Wednesday, as renewed tensions between the US and Iran weighed on market sentiment [1]. The decline in silver prices is attributed to ongoing uncertainty around the strategic Strait of Hormuz, with traders closely monitoring the potential for progress toward a US-Iran peace agreement [1].
The escalation in diplomatic friction follows fresh military clashes in the region. The US military confirmed it conducted self-defense strikes in southern Iran, while Iran’s Revolutionary Guard claimed to have targeted an American F-35 fighter jet and several drones allegedly violating Iranian airspace [1]. Iran's foreign ministry condemned the recent US airstrikes in Hormozgan province, calling them a "gross violation" of a fragile, seven-week-old ceasefire. Reports from Iranian media indicated explosions were heard in the region early Tuesday morning [1].
These developments have heightened fears of an energy-driven inflation shock, reinforcing expectations that central banks, including the Federal Reserve, may maintain tighter monetary policy for an extended period [1]. The US Consumer Confidence Index fell by 0.7 points to 93.1 in May, down from a revised 93.8 in April, with the decline attributed to rising inflation concerns linked to the Iran conflict [1]. While households expressed pessimism about the current labor market, they anticipated improvements by year-end [1].
Market participants are awaiting upcoming remarks from Federal Reserve policymakers, including Vice Chair Philip Jefferson and Governor Lisa Cook, to assess the potential impact of persistent inflation on future monetary policy. Additionally, traders are looking ahead to Thursday's release of the April US Personal Consumption Expenditures (PCE) data for further policy guidance [1].
CONCLUSION
Renewed US-Iran tensions and associated inflation fears have kept silver prices under pressure, with XAG/USD trading below $77 per ounce. Market participants are focused on upcoming Fed commentary and key inflation data for further direction, as expectations for prolonged tighter monetary policy persist.