Silver plunges 4% to $57.74 as Middle East tensions fuel rate-hike fears

Silver extended its slide on Monday, falling as much as 4% to $57.74 per troy ounce, as escalating US-Iran hostilities pushed crude oil higher and reinforced expectations that the Federal Reserve will keep interest rates elevated.

"The macro headwinds are overwhelming the physical-market story right now," said Omar Tariq, a commodities strategist. "A stronger dollar and rising rate-hike probability are forcing liquidation across precious metals, even as silver's industrial-demand narrative remains intact."

COMEX silver futures dropped $2.34 to $57.82 per troy ounce in afternoon trading, while COMEX gold fell $104 to $4,009. The selloff accelerated after Brent crude surged more than 4% to above $79 a barrel following the weekend's missile and drone exchanges between the US and Iran, which disrupted shipping through the Strait of Hormuz. The dollar index rose 0.30%, and the 10-year US Treasury yield climbed to 4.58%, with CME FedWatch data showing a 69% probability of a rate hike at the September meeting.

Silver has now lost roughly 50% from its January high of $121.64, set on Jan. 29 before a 27% single-day plunge triggered by then-Fed Chair nominee Kevin Warsh's hawkish policy signals. The metal gained nearly 150% in 2025, driven by a mix of investor demand and growing industrial consumption, but has since given back most of those gains as rate-cut expectations evaporated.

Industrial Demand vs. Macro Pressure

About 60% of silver consumption comes from industrial applications, including semiconductors, solar panels, and electric-vehicle components, where the metal's high electrical and thermal conductivity make it difficult to substitute. The market is in its sixth consecutive year of a supply deficit, according to the Silver Institute, as mine output — largely a byproduct of copper and lead-zinc operations — struggles to keep pace with demand.

However, high prices have already triggered substitution in the solar industry, where manufacturers have cut silver consumption by about 19% this year, and one major producer recently announced a full switch to copper. That headwind is partly offset by rising demand from AI data centers, which consume silver in high-performance connectors and thermal management systems.

What's Next for Silver

Investors will watch Fed Chair Kevin Warsh's congressional testimony on Tuesday for clues on the rate path, along with US CPI, PPI, retail sales, and jobless claims data due this week. A hawkish outcome could push silver toward the $55 support level, while any de-escalation in the Middle East or softer inflation data may trigger a relief rally.

JPMorgan analysts forecast silver finishing 2026 around $80 per ounce, implying roughly 38% upside from current levels, contingent on industrial demand holding up and the Fed refraining from additional tightening. Silver at $57.74 is trading about 52% below its all-time high of $121.64 and roughly 25% below its 2026 average, according to Bloomberg data.

This article is for informational purposes only and does not constitute investment advice.