Silver at a Crossroads: Geopolitical Turmoil Meets a Deepening Supply Crisis

Silver drops nearly 7% as Strait of Hormuz tensions boost dollar and yields, but a six-year structural deficit and 800M oz supply shortfall underpin long-term bullish case.

The silver market is caught in a tug-of-war between two powerful forces. On one side, a six-year streak of structural deficits is steadily eroding global inventories. On the other, a geopolitical flashpoint in the Middle East is triggering a violent selloff, sending the metal down nearly seven percent in a single week.

The immediate catalyst is the escalating standoff over the Strait of Hormuz. The US and Iran remain locked in a tense blockade, with peace talks stalled and President Donald Trump escalating rhetoric on social media. US naval forces have been ordered to fire on hostile mine-layers, and troops recently boarded an Iranian supertanker in the Indian Ocean. The fallout has been immediate: crude oil has surged to around $93 a barrel, stoking fears of stubborn inflation and tighter monetary policy.

That environment is toxic for silver. As a non-yielding asset, it suffers when real interest rates rise and the dollar strengthens. Rather than behaving as a safe haven, the metal is trading like a risk asset, with the dollar's rally and climbing bond yields piling on the pressure. All eyes are now on the Federal Reserve’s next rate decision, due on April 29.

A Market Starved of Supply

Yet beneath the short-term noise, a far more profound story is unfolding. The World Silver Survey 2026 projects a supply deficit of 46.3 million ounces this year, marking the sixth consecutive year of shortfalls. The cumulative shortfall over that period now exceeds 800 million ounces — roughly the equivalent of an entire year’s global mine output.

Supply growth remains anaemic, with total production expected to edge up just 1.5 percent to around 1.05 billion ounces in 2026. Demand, however, shows no signs of easing. Industrial consumption stands at roughly 650 million ounces, driven by robust manufacturing activity. While the photovoltaic sector is gradually reducing silver content per solar cell through technological thrifting, overall usage remains elevated. Investment demand for bars and coins has jumped 18 percent to a three-year high of 227 million ounces.

The London Vaults Are Under Watch

The physical tightness is becoming visible in the vaults. LBMA inventories stood at 27,487 tonnes at the end of March, up 1.6 percent month-on-month — a rise that has done little to calm market nerves. The gap between paper-market pricing and physical availability is widening, and in Asia, premiums over the London reference price remain significant, pointing to growing regional fragmentation.

Chart Levels in Focus

Silver is currently trading at around $75 an ounce, having fallen below its 38-day moving average — a psychologically important level. The long-term uptrend remains intact, with the metal still comfortably above its 200-day average, but the volatility is extreme. After hitting record highs earlier this year, the price briefly plunged to $61 during the height of the Gulf tensions. Analysts are now watching the $75 support level closely; a sustained break below it could trigger a rapid correction toward $72.

The Fed and the Data Calendar

The macro calendar offers the next potential catalyst. The FOMC meets on April 28-29, with markets expecting rates to remain unchanged at 3.50-3.75 percent. The focus will be on the committee’s accompanying commentary on inflation. On April 30, first-quarter GDP data and the core PCE index for March are due. If those numbers come in weaker than expected, the dollar could lose some of its recent strength, giving silver room to recover.

For now, the metal is caught between a geopolitical storm and a structural supply crisis. The deficit is real and deepening. But in the current environment, it is the headlines from the Gulf — and the Fed — that are driving the price.