Is silver losing steam as US-Iran peace hopes face a fresh test?

Silver fell in Asian trading on Friday, giving back part of the previous session’s sharp advance, as fresh military friction near the Strait of Hormuz cooled optimism that a US-Iran peace deal was close.

The white metal traded near $67 an ounce after jumping more than 6% on Thursday.

The pullback reflected a broader rethink across precious metals, where traders are weighing headline-driven haven demand against the risk that sticky inflation will keep global interest rates higher for longer.

Silver has been especially sensitive to the competing signals.

It can benefit from geopolitical stress like gold, but it is also exposed to growth and industrial-demand expectations, leaving it vulnerable when rate fears rise.

Hormuz remains the market’s fault line

The latest pressure came after reports that US forces intercepted Iranian attack drones near the Strait of Hormuz, the narrow waterway that remains central to global oil flows.

Iranian state media described the incident differently, linking explosions in the area to a confrontation with a vessel accused of breaching local restrictions.

The clash complicated the more constructive tone that followed President Donald Trump’s decision to pause planned strikes on Iranian energy infrastructure.

Trump has said a comprehensive agreement with Tehran could be completed as soon as this weekend, with shipping lanes in the Strait of Hormuz expected to reopen safely under the proposed framework.

Tehran, however, has yet to give a clear final approval. That gap between market hope and political confirmation is keeping traders cautious.

Any renewed threat to commercial shipping would quickly feed into oil prices, inflation expectations and demand for defensive assets.

Rate pressure returns to the foreground

The other drag on silver is monetary policy. US producer prices rose 6.5% from a year earlier in May, the fastest annual increase in three and a half years, as energy costs surged.

The data strengthened expectations that the Federal Reserve may still have to raise rates later this year if inflation proves harder to contain.

Higher rates tend to weigh on precious metals because they increase the relative appeal of interest-bearing assets.

That matters for silver as much as gold, especially after a steep rally that left prices vulnerable to profit-taking.

ECB move adds to caution

The European Central Bank added to the hawkish backdrop by raising rates for the first time since 2023, responding to renewed inflation pressure from the Middle East energy shock.

The move reinforced the sense that central banks are not yet ready to look through the latest price spike.

For silver, the next move may depend on which story becomes clearer first: a credible diplomatic breakthrough in the Gulf, or more evidence that inflation is forcing policymakers back towards tighter policy.

Until then, volatility is likely to remain elevated.