Silver prices (XAG/USD) declined to around $74.70 per troy ounce during Asian trading hours on Wednesday, reversing modest gains from the previous day. This drop was attributed to renewed hostilities in the Middle East, specifically after Iran launched ballistic missiles toward Kuwait and Bahrain. According to the US military, these missiles failed to hit their targets, leading to retaliatory strikes by American forces on Iran's Qeshm Island. The situation has heightened market caution, especially as uncertainty persists regarding US-Iran peace negotiations. While US President Donald Trump stated that discussions are ongoing, Iranian state media have cast doubt on the progress of these talks [1].
The geopolitical escalation has also raised concerns about a prolonged closure of the Strait of Hormuz, which could drive energy prices higher and intensify global inflationary pressures. This scenario reinforces expectations that the Federal Reserve will maintain elevated interest rates for an extended period. The 'higher-for-longer' rate outlook is further supported by robust US economic data: the ISM Manufacturing PMI rose to 54 in May 2026, up from 52.7 in the previous two months and marking the strongest factory expansion since May 2022. Additionally, April JOLTS data showed job openings surging to a nearly two-year high of 7.6118 million, alongside declining layoffs [1].
With strong manufacturing and employment figures complicating the inflation outlook, investors are now focused on the upcoming Nonfarm Payrolls report for further guidance on the Federal Reserve's policy trajectory. The combination of geopolitical risks and resilient US economic data has contributed to the recent volatility in silver prices [1].
CONCLUSION
Silver prices have come under pressure due to escalating Middle East tensions and strong US economic data, which support expectations for prolonged high interest rates. Investors are closely watching upcoming economic releases and geopolitical developments for further direction. The market remains cautious amid ongoing uncertainty in both monetary policy and international relations.