• Silver faces downward pressure as Strait of Hormuz tensions spark fears of an energy-driven inflation shock.
• US-Iran peace optimism faded after US airstrikes and Iranian claims of targeting an American F-35 and several drones.
• Silver traders analyze the Fed’s outlook as a declining US Consumer Confidence Index dampens market sentiment.

Silver price (XAG/USD) extends its losses for the second successive day, trading around $75.10 per troy ounce during the early European hours on Wednesday. The non-yielding asset faces persistent downward pressure as renewed uncertainty over the status of the Strait of Hormuz sparked fresh fears of an energy-driven inflation shock. Consequently, these supply-side anxieties have bolstered expectations that central banks will maintain a hawkish stance and keep interest rates higher for longer.

Optimism for a US-Iran peace deal rapidly eroded following US military “self-defense” airstrikes in southern Iran. In response, Iran’s Revolutionary Guard claimed to have targeted an American F-35 fighter jet and several drones for allegedly violating Iranian airspace. Iran’s foreign ministry strongly condemned the strikes in the southern Hormozgan province, branding them a “gross violation” of a fragile, seven-week-old ceasefire. The diplomatic fallout follows state media reports of heavy explosions echoing through the region early Tuesday morning.

Silver traders are closely analyzing the Federal Reserve’s (Fed) monetary outlook, a key driver for the non-interest-bearing Silver. Market sentiment was recently hit by the US Consumer Confidence Index, which edged down 0.7 points to 93.1 in May from an upwardly revised 93.8 in April. This dip was largely driven by escalating inflation anxieties tied to the ongoing conflict in Iran. While households expressed near-term pessimism regarding the current labor market, they remain optimistic that conditions will improve by year-end.

Moving forward, the market is highly focused on upcoming commentary from Fed Vice Chair Philip Jefferson and Governor Lisa Cook for clues on how sticky inflation might shape interest rates. Additionally, traders are awaiting Thursday’s release of the April US Personal Consumption Expenditures (PCE) data for definitive policy cues.

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