Silver prices weakened toward US$66 per ounce on Monday, extending their decline into a fourth week as the Middle East conflict rekindled inflation concerns. At the same time, the need for some major economies to strengthen liquidity is seen as increasing the incentive to sell liquid assets, including precious metals, to cushion the impact of the war on financial conditions.

The Iran war shows no signs of abating. US President Donald Trump has threatened to attack Iranian power plants if the Strait of Hormuz is not reopened, while Tehran has warned it will target critical US and Israeli assets in the region if its energy facilities are attacked. This risk of escalation keeps energy prices high and reinforces the inflation narrative that holds back room for monetary policy easing.

Last week, silver fell more than 15% after a surge in oil prices triggered a repricing of internasional interest rates. The market is starting to price in a longer easing pause, and even the possibility of interest rate hikes, as energy inflation risks persisting and spreading to broader price pressures.

In the US, market participants are

In the US, market participants are increasingly weighing the possibility of a Fed rate hike towards the end of the year amid persistent inflation concerns. Outside the US, the ECB, the Bank of England, and the Bank of Japan all held interest rates unchanged last week but signaled their readiness to tighten again if inflationary pressures persist.

Against this backdrop, silver remains vulnerable to the combination of expensive energy, a strong dollar-yield environment, and liquidity dynamics. As long as the market perceives the risk of energy inflation as more dominant than the risk of a slowdown, silver's recovery could potentially remain limited and volatility high.