Silver Rallies as Falling Oil Prices Ease Rate Hike Concerns

Silver climbed more than 1% toward $59 an ounce on Monday as easing tensions between the US and Iran triggered a sharp decline in oil prices, helping to ease inflation concerns and temper expectations of further aggressive Federal Reserve tightening ahead of this week's policy meeting. Brent crude retreated from two-month highs after Washington and Tehran paused hostilities, fueling hopes for a diplomatic resolution that could de-escalate the conflict and restore shipping through the Strait of Hormuz. Iran also said it would refrain from further attacks as long as the US maintained its pause in military operations. Investors are now focused on the Federal Reserve's policy decision on Wednesday. Markets currently price in around a 30% chance of a rate hike this week and roughly an 80% probability of another increase in September.

Silver climbed more than 2% toward $60 an ounce on Monday, moving away from eight-month lows as oil prices dropped sharply following a pause in hostilities between the US and Iran over the weekend, reducing concerns over supply disruptions and inflation. The US suspended its nearly two-week campaign of strikes against Iran beginning late Friday without an official announcement, while Tehran said it had ended its retaliatory strikes in response and held discussions with Oman regarding the Strait of Hormuz. Precious metals struggled in recent weeks amid escalating hostilities in the Middle East, with supply disruption spreading from the Strait of Hormuz to the Red Sea. Meanwhile, the Federal Reserve is widely expected to leave interest rates unchanged on Wednesday before raising them in September, although some market participants believe the central bank could move as early as this week's meeting in response to renewed inflationary pressures.

Silver rose 1% to around $58 an ounce on Friday, recovering some ground after tumbling more than 3% in the previous session, as investors assessed developments in the Middle East for clues on energy-driven inflation risks and the outlook for US interest rates. Concerns over Gulf oil supply disruptions have lifted crude prices, reinforcing expectations that interest rates could remain higher for longer and weighing on precious metals. Investors are now focused on next week's Federal Reserve meeting, where policymakers are widely expected to leave rates unchanged, although markets continue to price in roughly an 80% chance of a rate hike in September. Meanwhile, the European Central Bank kept interest rates unchanged on Thursday, as expected, while signaling that another increase in September remains on the table.