Silver Price Forecast: Why has XAG/USD slipped below $57.00 as soaring oil stokes inflation fears?

• Silver comes under pressure as drone attacks in the Middle East and Ukraine disrupt oil infrastructure, pushing energy costs higher and stoking inflation concerns.
• Market uncertainty remains elevated amid the Middle East conflict and Iran’s calls for relief from US sanctions.
• Non-yielding Silver faces pressure from a 90% probability of a December rate hike, even as traders expect rates to remain unchanged next week.

Silver remains under pressure as higher oil prices revive inflation concerns and strengthen expectations of a Federal Reserve (Fed) rate hike, weighing on the non-yielding metal. During Thursday’s Asian session, Silver price (XAG/USD) trades near $56.80 per troy ounce, extending its decline for a second consecutive day.

Concerns about possible energy supply disruptions and heightened geopolitical tensions in the Middle East lifted crude oil prices after a drone strike on Saudi Aramco’s Shaybah oil field caused two casualties. Meanwhile, large-scale Ukrainian drone attacks targeted key Russian oil infrastructure this week. The strikes signalled Kyiv’s intention to obstruct Moscow’s planned increase in diesel exports under a recent agreement between Presidents Trump and Putin.

Diplomatic developments added another layer of complexity to the regional geopolitical situation. On Wednesday, Iranian Foreign Minister Abbas Araghchi said the United States must end its naval blockade and show a genuine commitment to a diplomatic solution. He stressed that Tehran was prepared to return to negotiations if there was concrete evidence of a sincere American effort to secure a just and lasting end to the conflict.

How is a new Cold War reshaping supply chains and energy risks?

Energy security is becoming more central as strategic alliances and trade routes are reorganised, according to Rabobank analysts. They argue that the changing geopolitical environment cannot be overlooked: recent US policy shifts and regional tensions highlight how “it matters enormously because energy still does, especially in a new Cold War along supply chains.” In their assessment, this realignment leaves markets more vulnerable to abrupt disruptions and increases volatility in oil-linked assets.

Ahead of next week’s meeting, investors are closely assessing the direction of the Federal Reserve’s (Fed) monetary policy. Last week, Fed Chair Kevin Warsh offered no guidance on when further interest rate increases might be needed, or whether they would be necessary, leaving the outlook uncertain. The CME FedWatch Tool puts the market-implied probability of rates remaining unchanged next week at 84%, while traders assign a 90% probability to a December rate hike.