Silver backs off five-week high on renewed Middle East tensions

Silver prices lost more than 2.5% in the European market on Monday, moving away from five-week highs due to active correction and profit-taking, alongside pressure from a rising U.S. dollar fueled by renewed geopolitical tensions in the Middle East.

The U.S. Navy's seizure of an Iranian cargo ship has escalated tensions between the United States and Iran over control of the Strait of Hormuz, while Tehran continues to refuse participation in a new round of negotiations scheduled for later today in Pakistan.

Price Overview

- Silver Prices Today: Silver metal prices fell by 2.65% to ($78.65), from an opening level of ($80.78), which also marked the daily high.

- Upon price settlement on Friday, silver prices achieved a 0.3% increase, marking the first gain in three days and hitting a five-week high of $83.06 per ounce following Iran's announcement to open the Strait of Hormuz.

- Last week, silver surged by 6.4%, marking its fourth consecutive weekly gain, supported by the Iranian war truce and improved market sentiment.

The U.S. Dollar

The dollar index rose 0.15% on Monday, extending its gains for a third consecutive session and reaching its highest level in nearly a week. This reflects the continued ascent of the American currency against a basket of global currencies.

The rise is driven by renewed safe-haven buying of the U.S. dollar amid escalating U.S.-Iran tensions and diminishing prospects for a Middle East peace agreement.

Charu Chanana, head of investment strategy at Saxo, noted that the weekend escalation has revived the geopolitical risk premium just as markets had begun to price in potential peace gains.

Iranian War Updates

- The Iranian Navy announced the re-closing of the Strait of Hormuz as of Saturday afternoon until the U.S. blockade on Iranian vessels is lifted.

- U.S. President Donald Trump stated that the U.S. Navy intercepted the Iranian-flagged cargo ship "Tosca" in the Gulf of Oman.

- Tehran labeled the attack on the ship an "act of maritime piracy" and a flagrant violation of the ceasefire agreement, vowing to retaliate.

- While Islamabad prepares to host a second round of peace negotiations today, Iran has so far refused to participate.

- International and regional parties are pressuring Tehran to join the talks before the two-week ceasefire expires tomorrow, Tuesday.

Global Oil Prices

Global oil prices surged by more than 5% on Monday, staging a strong recovery from four-week lows as fears of supply disruptions from the Arabian Gulf resurfaced following the re-closing of the Strait of Hormuz.

Rising oil prices are renewing concerns over accelerating inflation, which could prompt global central banks to raise interest rates in the near term—a sharp shift from pre-war expectations of rate cuts or prolonged pauses.

U.S. Interest Rates

- According to the CME Group's FedWatch tool: the probability of keeping U.S. interest rates unchanged at the April meeting is currently priced at 99%, while the probability of a 25-basis-point hike stands at 1%.

- Investors are closely monitoring upcoming U.S. economic data to re-evaluate these expectations.