Hormuz Crisis Deepens Silver's Pain as WisdomTree Slashes ETC Costs

WisdomTree slashes daily swap rate on 3SIL ETC from Sept 1, 2026, as silver plunges 22% on Hormuz crisis, offering cost relief but facing bearish gold-silver divergence.

Investors holding the WisdomTree Silver 3x Daily Leveraged ETC have received a rare piece of positive news on the cost front, even as the underlying metal continues to suffer one of its worst geopolitical routs in years. The fund manager is cutting the daily swap rate on the 3SIL security from 0.01248% to 0.00692%, effective September 1, 2026, with BNP Paribas serving as swap provider. The move offers structural relief on holding costs for a product that has been battered by forces far beyond fee structures.

The timing of the reduction, however, coincides with a brutal market environment. Silver has tumbled to around $73 an ounce, shedding roughly 22% since the outbreak of hostilities between the US, Israel, and Iran in late February. The crisis at the Strait of Hormuz, which Iran effectively shut on February 28, has sent Brent crude surging to $111.65 a barrel — a 6% jump in just five days — and reignited inflation fears across global markets.

That dynamic has created a peculiar trap for silver. As a precious metal, it typically benefits from crisis-driven safe-haven flows. But with roughly 60% of silver demand tied to industrial applications — versus just 10% for gold — the commodity is acutely vulnerable to the recessionary fears that higher energy prices and tightening monetary policy tend to produce. The European Central Bank already shelved its planned rate cuts back in March, and higher interest rates punish non-yielding assets like silver with particular ferocity.

The result has been a stark divergence within the precious metals complex. The gold-to-silver ratio has blown out to 62.05:1, signaling that investors are parking their safe-haven capital in gold rather than silver. Since April 22, silver has lost about 7% while gold has slipped only 4%. Market participants interpret the widening ratio as a distinctly bearish signal for the white metal.

For holders of the triple-leveraged ETC, the damage is compounded by the product's mechanical structure. The fund, which tracks the Solactive Silver Commodity Futures SL Index, resets its leverage daily. In a volatile market without a clear directional trend, that daily reset creates a compounding effect that erodes value even if the underlying metal ends up flat. A 22% decline in the spot price translates into far steeper losses for leveraged holders, and the Hormuz crisis has delivered precisely the kind of choppy, directionless trading that punishes this structure most severely.

The ETC currently holds $283 million in assets under management, with a total expense ratio of 0.99% annually. While the swap rate cut improves the product's cost base, the near-term outlook remains dominated by geopolitics. Analysts at J.P. Morgan still project an average silver price of $81 an ounce for 2026, and the LBMA consensus forecasts a range of $79 to $81 — a significant gap from current levels that underscores just how deeply the conflict has depressed prices.

Whether that gap closes depends largely on developments in the Persian Gulf. A reopening of the Strait of Hormuz would ease stagflation fears and potentially allow silver's industrial demand story to reassert itself. Until then, the metal remains caught between its crisis-era safe-haven credentials and the recessionary headwinds that make its leveraged tracker such a volatile bet.