Silver’s Dual Shock: A Hawkish Fed Debut Meets a Historic Iran Truce

Silver rebounds above $70 after peace deal between Washington and Tehran, reviving bullish momentum despite persistent inflation and hawkish Fed under new Chair Kevin Warsh.

A dramatic reversal swept the silver market this week as a surprise peace deal between Washington and Tehran overshadowed the hawkish debut of new Federal Reserve Chair Kevin Warsh. The metal, which had been battered by inflation fears and a tight monetary stance, surged roughly four percent to nearly $70.80 after the two nations announced an end to hostilities. The move broke silver decisively back above the psychologically important $70 mark, after it had slumped to $67.76 in the previous session.

Before the geopolitical shock, the outlook had been grim. Silver lost 22.51 percent of its value in the past month, though it still held an annual gain of 86.62 percent. The drag came from stubborn inflation: the Bureau of Labor Statistics reported the consumer price index rose to 4.2 percent in May, the highest reading since April 2023. Against that backdrop, the Federal Open Market Committee was widely expected to hold the federal funds rate at 3.50 to 3.75 percent, with the CME FedWatch Tool putting the probability at 98.2 percent. Warsh, a known inflation hawk, had dampened any hope of early rate cuts, making non-yielding assets like silver less attractive. The gold-silver ratio widened to 63.9 by mid-June, up from 55.16 in May, confirming silver’s relative weakness.

Then came the announcement that upended expectations. Trump declared the end of hostilities and lifted the naval blockade, reopening the strategic Strait of Hormuz. Oil prices crashed, and the US dollar tumbled to a ten-day low, boosting dollar-denominated commodities. The probability of a further Fed rate hike in December dropped sharply from 69 percent to below 50 percent, as lower energy costs eased inflation concerns. The rally also lifted sentiment in Asian markets, with the Nikkei 225 climbing five percent, raising hopes for stronger industrial demand.

Yet the fundamental picture remains layered. The global silver market continues to run a structural supply deficit: demand exceeded mine production by 160 to 200 million ounces in 2025, according to industry data. However, the Silver Institute projects a significant cooling in the photovoltaic sector this year, with consumption for solar panels falling 19 percent, or roughly 151 million ounces. That decline partly offsets growth in newer applications, leaving the industrial demand outlook mixed.

For now, traders are watching the technical resistance at the 20-day moving average near $71.70. The next catalyst comes on Friday, when the US and Iran are scheduled to sign the official memorandum in Switzerland. Meanwhile, the Fed’s updated dot plot, due Wednesday evening, will be the key monetary event. Goldman Sachs has already adjusted its forecast, pushing the expected timing of first rate cuts to 2027 at the earliest, a reminder that the central bank’s hawkish bias is far from gone.

Silver thus finds itself caught between opposing forces: a geopolitically driven rally that has revived bullish momentum, and a Fed that, under new leadership, shows no sign of easing soon. The near-term path will depend on whether the peace deal holds and how the central bank’s projections are interpreted. But the underlying supply deficit remains intact, providing a long-term floor even as short-term headwinds from industrial demand and monetary policy persist.