On Monday, the US Dollar (USD) gained strength as hopes for a near-term US-Iran peace deal faded, following reports from Iran’s Tasnim News Agency that Tehran has suspended message exchanges with Washington over Israel’s military operations in Lebanon [1][2]. This development comes amid Israel expanding its military offensive against Hezbollah in southern Lebanon [1]. Iranian Foreign Minister Seyed Abbas Araghchi warned that any violation of the ceasefire between Iran and the US would be considered a breach across all regional fronts, including Lebanon, with negotiations remaining deadlocked on key issues such as Iran’s nuclear program and the future status of the Strait of Hormuz [2].
The strengthening US Dollar has led to notable market reactions. USD/CHF traded around 0.7878, up nearly 0.88% on the day, as the Swiss Franc (CHF) came under pressure despite stronger-than-expected Swiss GDP figures, with Switzerland’s economy expanding by 0.7% QoQ in Q1, beating forecasts of 0.5% [1]. The US Dollar Index (DXY) recovered to 99.33 after hitting a two-week low near 98.75 last Friday [1]. Meanwhile, Silver (XAG/USD) declined to around $74.60 per troy ounce, down 0.92% on the day, as investors favored the US Dollar as the primary safe-haven asset amid persistent Middle East tensions [2].
Oil prices also rebounded sharply, with West Texas Intermediate (WTI) Crude Oil up more than 5% on Monday, fueling inflation concerns and expectations that the Federal Reserve (Fed) may need to raise interest rates, which pushed US Treasury yields higher [1][2]. Higher energy costs and strong US manufacturing data, including the S&P Global US Manufacturing PMI rising to 55.1 in May from 54.5 in April and ISM Manufacturing PMI climbing to 54, its highest since May 2022, further supported the Dollar [1]. In contrast, the Swiss National Bank (SNB) is expected to keep policy unchanged as Swiss inflation remains within the 0–2% target range, with annual CPI forecast to rise to 0.8% in May from 0.6% in April [1].
Despite heightened geopolitical tensions, flows into precious metals remain limited, as a stronger Dollar makes Silver more expensive for holders of other currencies, weighing on international demand [2]. Investors are now awaiting upcoming US labor market data, including the Nonfarm Payrolls (NFP) report due on Friday, for further clues on the future direction of Fed policy, with interest-rate expectations remaining a key driver for Silver price action [2].
CONCLUSION
Suspended US-Iran talks and escalating Middle East tensions have boosted the US Dollar, pressuring both the Swiss Franc and Silver prices. Strong US economic data and rising oil prices are fueling expectations of further Fed tightening, while investors await US labor market data for additional policy signals. The market impact is high, with safe-haven flows favoring the Dollar over precious metals and other currencies.