Silver Slides 2.6% as Iran Tensions and Hawkish Fed Overwhelm Record Supply Deficit
26.05.2026 - 19:02:59 | boerse-global.de
Silver edged lower to $76.05 a troy ounce on Tuesday, shedding 2.6% from the previous session, as the metal found itself caught between opposing forces. On one side, escalating Middle East tensions and a deepening structural supply gap provided support. On the other, a resolutely hawkish Federal Reserve and soaring energy costs undermined the appeal of non-yielding assets.
The immediate trigger for the selloff came from fresh geopolitical friction. The U.S. Central Command reported conducting "defensive strikes" against missile positions in southern Iran, while Tehran claimed it had shot down an American MQ-9 Reaper drone. The development dashed hopes for a swift reopening of the Strait of Hormuz, sending Brent crude up $2.10 to $98.24 a barrel. Rising energy prices feed into inflation expectations, and that, in turn, dims the outlook for rate cuts. Markets now assign a 40% probability that the Fed will raise rates by December 2026, a stark headwind for an asset that offers no yield.
That bearish macro backdrop was reinforced by comments from Fed Governor Christopher Waller, who signaled he no longer considered a dovish tilt in the central bank's policy statement appropriate. The April CPI reading of 3.8% — above the 3.7% consensus forecast and the highest since May 2023 — has all but killed hopes for an early easing. The probability of a rate cut at the June meeting has slumped to below 8%, with the first move now expected in September at the earliest, though November or December are seen as more likely. In a further sign of the shifting rate outlook, derivatives markets are pricing in a 55% chance of at least one 25-basis-point rate increase by October.
Yet beneath the short-term noise, the silver market is telling a different story — one of persistent and even worsening scarcity. The Silver Institute projects a global supply deficit of 46.3 million ounces in 2026, following a shortfall of 40.3 million ounces last year. A separate estimate from the same institute points to a record deficit of 215 million ounces. If realized, it would mark the sixth consecutive year of supply falling short of demand. Since 2021, cumulative draws from above-ground inventories have reached 762 million ounces to bridge the gap.
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Three forces are driving the imbalance. Industrial demand from AI infrastructure, solar panels, and semiconductors continues to climb. China's export restrictions — implemented in early 2025 and tightened further in January 2026 — allow only producers with annual output of at least 80 tonnes to obtain export licenses, curbing flows to Western markets. Meanwhile, mine supply remains sluggish. New projects such as the Terronera mine in Mexico, which reached commercial production in October 2025, are unlikely to significantly close the deficit, analysts say.
Demand shifts within the silver market are highly uneven. Photovoltaic manufacturers are aggressively reducing the silver content per panel, and the sector's overall silver consumption is expected to fall by around 19% in 2026. But silver's superior electrical conductivity is hard to replace at scale, and emerging applications — electric vehicles, AI data centers, and 5G infrastructure — are creating new demand channels. At the same time, physical investment demand is staging a comeback: inflows into coins, bars, and exchange-traded products are projected to rise 20% to a three-year high of 227 million ounces, driven largely by Western investors who had been on the sidelines.
Institutional investors appear to be taking advantage of the price retreat. Silver exchange-traded funds have added 36 tonnes to their holdings in recent sessions, a signal that at least some market participants view the pullback as a buying opportunity. Technically, silver has been consolidating after touching a high near $90 in May and is now trading above the $75 mark but still below its 100-day moving average.
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Forecasters see room for a rebound. J.P. Morgan Global Research expects silver to average $81 an ounce in 2026, more than double last year's average. The LBMA analyst survey points to a consensus average of $79.57, with the full-year range seen between $42 and $165 — a wide band that underscores the tug-of-war between a structural deficit and macro headwinds.
In the near term, silver remains hostage to developments on two fronts: the trajectory of Fed policy and the outcome of Iran negotiations. U.S. Secretary of State Marco Rubio has suggested that a successful agreement with Tehran could lead to a full reopening of shipping lanes within 30 to 60 days, which would ease inflationary pressures and, by extension, the rate burden on precious metals. Absent such a diplomatic breakthrough, the white metal must navigate a punishing environment where tight supply confronts an asset class that is penalized by high yields.
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