Silver's Wild Ride: Truce, Tumble, and a Ticking Supply Bomb

Silver surged over 5% on a US-Iran ceasefire and oil price crash, but gains reversed on Strait of Hormuz uncertainty. A deep supply deficit fuels bullish long-term forecasts.

A two-week truce between the US and Iran briefly ignited a powerful rally in silver, sending the metal soaring over 5% to nearly $77 an ounce. The surge, fueled by a collapse in oil prices and shifting interest rate expectations, proved the market's sensitivity to geopolitical and macroeconomic winds. Yet contradictory reports regarding the closure of the Strait of Hormuz quickly snuffed out the optimism, pulling futures back below $75 and underscoring the fragile nature of any short-term recovery.

The immediate catalyst was clear: the announced ceasefire sparked a wave of risk-on sentiment. Silver, with its significant industrial component, outperformed gold in this environment. The gold-silver ratio dipped below 63, highlighting the white metal's relative strength when geopolitical tensions ease and economic optimism rises. This dynamic is central to silver's character; it behaves not just as a precious metal but as an industrial commodity tied to global growth.

Parallel to the truce, a dramatic plunge in crude oil prices provided a second tailwind. Brent and WTI crude lost up to 16.4%, falling below $100 a barrel. Analysts, including Commerzbank's Carsten Fritsch, noted this significantly dampened inflation fears. Markets swiftly began pricing in more aggressive interest rate cuts from the Federal Reserve by year-end, pushing the yield on the 10-year US Treasury note down to around 4.29%. For a non-yielding asset like silver, falling bond yields directly boost its relative appeal.

However, the relief was short-lived. Conflicting news from Iranian agencies about continued maritime closures and potential tolls in the critical Strait of Hormuz reintroduced uncertainty by Thursday morning. A prolonged disruption in the region threatens to re-ignite energy costs, which could swiftly undermine hopes for imminent rate cuts. The market now awaits fresh impetus from upcoming US PCE inflation data for clues on the Fed's next move.

Beyond the daily headlines, a far more structural crisis is brewing. The physical market is under severe strain. Registered inventories at the COMEX exchange show a coverage rate of just 13.4%. Simultaneously, the market is grappling with its sixth consecutive annual supply deficit, estimated by the Silver Institute at approximately 67 million ounces. Industrial demand is the primary driver, particularly from data centers, electric vehicles, and solar panels. China's silver imports, reaching nearly 207 tonnes in the first two months of the year—their highest level in eight years—underscore this relentless demand.

This fundamental scarcity, set against a volatile macroeconomic backdrop, has resulted in wildly divergent price forecasts for 2026. The Reuters consensus sits at a modest $79.50, while major investment banks paint a far more bullish picture. Bank of America targets a range of $135 to $309, and Citigroup envisions $150 to $170. This enormous spread reflects a market torn between short-term interest rate anxieties and a long-term physical supply crunch.

Technically, silver's jump above $75 cleared a key hurdle. The next significant resistance zone lies between $78 and $79, a level that will test the rally's sustainability. If the $75 level holds as support, the technical picture remains constructive. Yet the metal's path remains fraught, caught between immediate geopolitical chaos, shifting central bank policies, and an underlying physical shortage that continues to tighten.