When the US military struck Iranian-linked targets near the Strait of Hormuz this week, the textbook safe-haven trade would have been to pile into precious metals. Instead, the exact opposite occurred. Silver tumbled to a three-week low of $71.81 per ounce on Thursday, settling around $73.20 — a decline of roughly 1.5%. By the close, the metal was changing hands at $73.34, down 1.7% on the session.
The culprit wasn’t a lack of geopolitical tension, but the specific channel it activated. The airstrikes, which Washington said were aimed at a facility threatening shipping in the vital waterway, sent crude oil prices surging roughly 2% in early trade. Higher energy costs rekindle inflation fears, which in turn reinforce expectations that the Federal Reserve will keep interest rates elevated for longer. For a non-yielding asset like silver, that calculus is deeply damaging.
The dollar seized on the narrative. The US Dollar Index climbed to 99.288 — its highest since May 22 and near the week’s peak — making silver more expensive for overseas buyers. Fed Governor Lisa Cook added to the pressure by signaling that the central bank should hold rates steady for now, while not ruling out further hikes given tariffs, the Iran conflict, and AI-driven investment. Vice Chair Philip Jefferson echoed the view, calling the current policy stance appropriate as long as inflation risks persist. The dollar’s strength crystallized a dilemma: instead of serving as a crisis hedge, silver got caught in the crossfire of an energy-driven inflation scare.
That dynamic played out across the precious metals complex, but silver took the hardest hit. Gold slipped 0.8%, platinum lost 0.5%, and palladium shed 0.7%. The message was clear: geopolitics does not automatically boost bullion. What matters is which transmission mechanism the crisis opens. This time, the oil-inflation-Fed channel was wide open.
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Beneath the short-term noise, the physical market tells a starkly different story. The World Silver Survey 2026 projects the sixth consecutive deficit year, with a supply gap of 46.3 million ounces — 15% wider than the previous year. Above-ground inventories have fallen by a cumulative 762 million ounces since 2021, providing long-term price support. Yet the industrial side is cooling: semiconductor and AI-related silver consumption is growing, but a sluggish photovoltaic sector is dragging overall demand. Analysts expect industrial offtake to dip roughly 3% in 2026 to about 639.6 million ounces.
Chartists see further downside risk after silver broke below $74, triggering technical selling that sliced through both the 50-day and 100-day moving averages. The Relative Strength Index now sits below 50, keeping the bears in control. Immediate support lies at $71.22; if that fails, the psychologically important $70 level comes into focus. On the upside, $75 represents the first resistance, followed by the $76 zone.
All eyes now turn to Friday’s US PCE inflation data, the Fed’s preferred gauge. A hotter-than-expected reading would further slash the odds of near-term rate cuts and heap additional pressure on silver. Meanwhile, the Hormuz negotiations remain unresolved — Iran is demanding a tolling system for the strait, while Washington insists on the removal of highly enriched uranium from Iranian soil. Until clear progress emerges, every fresh energy price spike poses another headwind for the metal.
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