XAG/USD falls to near $55.50 amid interest rate concerns

• Silver is on track to drop over 7% this week.
• Rising Middle East tensions and high oil prices fuel inflation and interest rate concerns.
• Fears of energy supply disruptions grow following reports of explosions and potential Red Sea shipping blockades.

Silver price (XAG/USD) remains subdued for the third successive day, trading around $55.50 per troy ounce during the Asian hours on Thursday. Silver is on track to drop over 7% this week as escalating Middle East tensions drive oil prices up. This surge in energy costs has kept inflation and interest rate concerns at the absolute forefront of investors’ minds, pulling momentum away from the non-yielding precious metal.

Reuters reported on Thursday that Iran has instructed Yemen’s Houthi militia to stand ready to close the critical Red Sea oil route if the United States strikes Iranian power infrastructure, presenting a potent new threat to global energy supplies. Amplifying these concerns, the Tasnim news agency reported explosions in Bandar Abbas, Qeshm, and Ahvaz, while very loud explosions were also heard in Kuwait and as far away as Basra.

These geopolitical flare-ups follow threats made earlier this week by US President Donald Trump, who stated the US would strike Iran’s bridges and power plants next week if the country does not return to the negotiating table.

Meanwhile, this week’s softer-than-expected US inflation data has effectively eliminated the chance of a July rate hike, even as Fed Chair Kevin Warsh reiterates his strict commitment to fighting inflation and restoring price stability. However, the market remains sharply divided over whether the Fed will resume tightening in September. This lingering uncertainty continues to weigh heavily on Silver, keeping the non-yielding metals under pressure.