Silver prices declined during Asian trading on Wednesday, with XAG/USD hovering near $74.70 per troy ounce, as escalating geopolitical risks in the Middle East collided with a resilient US economy that reinforced the outlook for sustained higher interest rates.
The non-yielding metal retreated after a short-lived rebound, undermined by concerns that any disruption near the Strait of Hormuz could drive energy costs higher and keep inflation sticky – a scenario that would complicate the Federal Reserve’s policy path and diminish the appeal of silver compared to interest-bearing assets.
Sentiment was further dampened by a round of robust US economic data. The ISM Manufacturing PMI climbed to 54 in May 2026, its strongest reading since May 2022, while April JOLTS job openings stood at 7.6118 million and layoffs fell. These figures strengthened the argument that the Fed has limited room to ease policy, raising the stakes for Friday’s Nonfarm Payrolls report.
Meanwhile, geopolitical tensions soared after Iran launched ballistic missiles toward Kuwait and Bahrain, prompting US retaliatory strikes on Iran’s Qeshm Island. The flare-up revived fears that maritime traffic through the Strait of Hormuz – a critical global energy chokepoint – could be threatened, injecting a risk premium into oil markets and reinforcing inflationary expectations.
Silver finds itself caught between two opposing forces: haven demand from instability and headwinds from higher-for-longer rate expectations. The metal’s industrial uses, such as in electronics and solar panels, add another layer of complexity, as global growth and manufacturing health also influence its price. For now, the interest-rate channel appears to dominate, leaving XAG/USD under pressure despite elevated geopolitical risk.
