Silver prices edged higher on Friday after suffering losses of more than 4% during the previous trading session.
The precious metal was trading around $57.60 per troy ounce during Asian trading hours.
Despite the modest recovery, silver remains under pressure from changing expectations around US monetary policy.
Higher oil prices linked to rising tensions in the Middle East are strengthening market expectations for potential Federal Reserve rate hikes.
The prospect of higher interest rates could weigh on silver.
The metal does not provide a yield, making it potentially less attractive when expectations for interest rates rise.
According to the CME FedWatch tool, money markets are currently pricing in an estimated 35.8% probability of a Federal Reserve rate hike this month.
Markets are also pricing in an 82.1% probability of at least a quarter-point rate hike in September.
The changing rate expectations are adding pressure to silver, even as the metal attempts to recover from its sharp decline in the previous session.
The rise in oil prices has become an important factor influencing expectations around US interest rates.
Higher oil prices are tied to growing tensions in the Middle East.
The increase in oil prices is contributing to stronger expectations that the Federal Reserve could raise interest rates.
This has created additional pressure for silver, which is considered a non-yielding asset.
Silver’s latest move comes as traders assess the impact of the broader geopolitical situation on markets.
While the metal has managed to recover some ground after its previous session losses, expectations of tighter monetary policy remain a potential headwind.
The CME FedWatch figures highlight the shift in market expectations.
Middle East tensions remain in focus
Geopolitical tensions have also continued to intensify.
The reported attacks allegedly took place because the tankers were accused of violating a blockade.
The developments have added to concerns over the security situation in the region and contributed to the wider escalation of tensions.
The situation has also involved direct US military action.
The US conducted its 13th consecutive night of military strikes on Iran.
The continued military activity has kept the Middle East firmly in focus for financial markets.
Developments in the region are being closely monitored as traders assess their potential impact on oil prices and broader market sentiment.
Investors are likely to remain focused on any further developments involving Iran, the Houthis and the United States.
For silver, the combination of geopolitical tensions and changing interest rate expectations presents competing forces.
However, rising expectations for higher US interest rates could continue to limit gains in the non-yielding precious metal.