Spot Silver dove to lows not seen since December 12th on Monday, extending a three-week streak of losses, as the Middle East conflict escalated, fueling inflation concerns and adding to prospects of higher interest rates globally.
Geopolitical risks rose further as the situation around the Strait of Hormuz deteriorated. US President Donald Trump issued a 48-hour ultimatum for Iran to reopen the crucial shipping channel and threatened to target Iran’s energy infrastructure if the demand is not met.
In response, Iran threatened to escalate strikes on energy infrastructure and to target key water desalination facilities across the Middle East should Trump follow through on a pledge to “obliterate” the country’s power plants.
The Federal Reserve raised its year-end PCE inflation forecast, highlighting the risk that higher energy prices tied to the Iran war could filter through to broader inflation. The central bank also signaled only one rate cut for this year and one additional cut for 2027.
Rate futures data indicated the US central bank was more likely to hike interest rates rather than lower them by year-end.
Views from policy makers at the Bank of Japan, the Bank of England and the European Central Bank collectively pointed toward a tighter policy bias in response to persistent inflation risks.
Higher interest rates tend to increase the opportunity cost of holding Silver, which pays no interest.
Spot Silver was last down 6.04% on the day to trade at $63.91 per troy ounce.
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