Silver prices (XAG/USD) declined to around $77.60 per troy ounce during Asian trading hours on Thursday, following modest gains the previous day [1]. The drop comes as traders react to ongoing geopolitical uncertainty in the Middle East, particularly the continued blockade of the Strait of Hormuz by Iran, which has kept energy prices elevated and stoked persistent inflation risks [1].
Iran has maintained strict control over the Strait of Hormuz, restricting vessel transit and targeting ships. Iranian parliament speaker Mohammad Bagher Ghalibaf stated that reopening the strait would be 'impossible' as long as the United States and Israel continue what he described as 'flagrant' ceasefire violations, including a US naval blockade [1]. On Wednesday, Iran reportedly fired on three ships in the strait and escorted two into Iranian waters, according to the Wall Street Journal. Iranian media indicated that the Revolutionary Guard was moving the vessels to Iran, escalating tensions further. However, White House press secretary Karoline Leavitt said these seizures did not breach the terms of the ceasefire [1].
The sustained pressure on silver prices is attributed to rising energy costs, which have heightened inflation concerns and dampened expectations for central bank rate cuts. A Reuters survey of economists found that 56 out of 103 respondents expect the Federal Reserve to keep its policy rate within the current 3.5%–3.75% range at least through September [1].
Market participants are closely monitoring the situation, as silver, a non-yielding asset, typically benefits from lower interest rates and safe-haven demand during periods of geopolitical instability. However, the current environment of elevated inflation and strong US dollar has limited silver's upside potential [1].
CONCLUSION
Silver prices have come under renewed pressure due to escalating tensions in the Strait of Hormuz and persistent inflation risks, with the market now expecting the Federal Reserve to maintain current interest rates through September. The ongoing geopolitical uncertainty and elevated energy prices are likely to keep silver volatile in the near term.