Inflation concerns fuel interest rate hike panic, causing spot silver to widen its decline to 9%.

Spot silver plummeted by 9.00% intraday, falling below $76 per ounce. The escalation of US inflation caused by the Middle East war has strengthened market expectations for the Federal Reserve to maintain higher interest rates, putting pressure on precious metals. The strategic Strait of Hormuz, a key global energy transport route, remains almost closed, and peace talks between the US and Iran have reached a deadlock, intensifying concerns about higher oil prices exacerbating inflationary pressures, thus boosting expectations for the Federal Reserve to hike rates. Global investors are selling government bonds, causing borrowing costs from Japan to the US to rise to the highest levels in years, as people are increasingly worried that war-induced inflation will force major central banks to seek rate hikes. Against this backdrop, US bond yields are rising in tandem with the US dollar. On Friday, the 10-year US bond yield rose to 4.583%, the highest level since May 2025. The US dollar index continued to rise, up 0.47% at 99.286 at the time of writing. The dramatic changes in oil prices and the inflation environment have led to a historic reversal in market pricing for the Federal Reserve's policy path. Just before the outbreak of the Middle East war in February, overnight index swap markets showed that traders generally expected the Federal Reserve to cut rates by around 50 basis points in the entire year of 2026. However, the energy shock triggered by the war has completely shifted the interest rate outlook. Currently, the CME Group's "FedWatch" tool shows that the market has largely ruled out the possibility of the Federal Reserve cutting rates before the end of 2027. Instead, the market expects a 39% probability of a 25 basis point rate hike before the end of this year, and a 37% probability of a 25 basis point rate hike before the end of October 2027.