Silver Stalls Near $56.80 as Oil Climbs Amid US-Iran Escalation and Rising Fed Rate Bets

• XAG/USD trades near $56.80 per ounce during Asian trading, extending gains for a second session after silver fell more than 6% last week.
• Brent crude trades above $90 per barrel after a ninth straight night of US strikes on Iranian targets and Iran said the ceasefire is over.
• The CME FedWatch Tool assigns a 61.4% probability to a September Fed rate hike, while markets still price in no change at the next meeting.
• The Silver Institute projects a sixth consecutive annual supply deficit in 2026 as demand exceeds mine output and recycled supply.
• A close above $57.30 opens the way to $58.00 and $58.86, while a break below $56.83 targets $55.76 and $54.80.

US-Iran Conflict Escalates & Oil Supply Risks Rise, Strengthening the Case for Higher Fed Rates

The conflict has expanded beyond military targets. Air raid sirens sounded in Bahrain after Iran launched missiles and drones toward Bahrain, Jordan, Kuwait, and Iraq. US officials reported a third American service member's death in two days, while Kuwait Petroleum Corp said an Iranian strike hit one of its oil facilities. 

The escalation raises the risk of oil supply disruptions, increasing inflation expectations and strengthening the case for higher Fed interest rates.

Higher Oil Prices & Hawkish Fed Signals Pressure Silver by Reinforcing Higher-for-Longer Rate Expectations

Fed communication reinforces expectations that interest rates will remain higher for longer. Cleveland Fed President Beth Hammack's remarks scored 7.2 on the FXS Speechtracker, above the 6.6 historical average, as she cited cost pressures from energy, supply chains, insurance, and AI data centers and reported business calls for stronger inflation control. She said many consumers "can't make ends meet" despite robust economic growth. 

The FXS Fed Sentiment Index rose 2.06 points to 128.64, above the neutral 100 threshold, indicating Fed communication remains focused on inflation even as geopolitical risks increase.

Fed Policy Guidance & Rate-Hike Expectations Shape Silver's Next Direction

The next key signals will come from the Fed's July policy statement, particularly any changes in its guidance on the timing of future rate moves, alongside daily changes in the CME FedWatch Tool's September rate-hike probability, which currently stands at 61.4% and reflects how quickly market expectations are adjusting to incoming inflation and geopolitical developments.

Fed Uncertainty & Oil Price Risks Keep Silver Range-Bound, Making Technical Levels Critical

Markets cannot yet determine whether the Fed will hold interest rates through year-end or deliver the September rate hike currently priced at a 61.4% probability, or whether the end of the Iran ceasefire will drive Brent prices higher first. 

Rather than sizing a position around a single Fed decision or geopolitical development, traders can use the established technical levels of $56.83 and $54.80 on the downside and $57.30 and $58.86 on the upside to manage risk without relying on a specific macro outcome.

Signals to Watch Next: Fed Decision vs. $57.30

The key signals to monitor are the Fed's late-July meeting decision, where markets currently price no change in interest rates, daily changes in the CME FedWatch Tool's September rate-hike probability, now at 61.4%, and whether Brent crude falls back below $90 per barrel, as each will influence expectations for inflation, monetary policy, and silver prices.