Silver (XAG/USD) fell 1.7% to about $79.30 in early European trading on Monday after Iran re-closed the Strait of Hormuz. Iran said the move was in response to the United States’ blockade of Iranian sea ports, after previously reopening the route on Friday following a ceasefire between Israel and Lebanon.
Hormuz is a key route for almost 20% of global energy supply, and the re-closure pushed oil prices higher. WTI crude rose 3.7% to around $88, adding to inflation concerns and reducing demand for non-yielding assets such as silver.
The US Dollar firmed as demand for safe assets increased and talks between Iran and the US did not restart. The US Dollar Index (DXY) was up 0.15% near 98.35, making dollar-priced silver less attractive.
Technically, silver stayed above the 20-day EMA at $76.85 and the rising support line near $76, with RSI around 56. Support sits near $76, then $72.61 (April 13 low), while resistance levels include $83.06 (April 17 high) and $87.45 (March 12 high).
Given the renewed closure of the Strait of Hormuz, we should anticipate a spike in market volatility in the coming weeks. We saw a similar pattern during the 2025 Red Sea shipping disruptions, when silver’s implied volatility on options contracts increased by over 25% in a ten-day period. This environment suggests that strategies profiting from price swings, such as purchasing straddles or strangles, could be effective.
The immediate reaction is a stronger US Dollar, which is acting as a significant headwind for silver prices. The Federal Reserve’s March 2026 minutes already indicated a hawkish stance due to core inflation remaining stubbornly above 3.5%, so this new oil-driven inflation scare strengthens the case for higher interest rates. This makes short-term bearish plays, such as buying put options with a strike price near the $76 support level, a logical response to the dollar’s safe-haven rally.
However, the technical structure remains bullish as long as the price holds above the $76 mark. We must remember that during the high inflation period of 2022, silver initially dipped on rate hike fears before ultimately rallying as an inflation hedge. For traders who believe this geopolitical event will be short-lived, the current dip towards $79 could be seen as an opportunity to sell cash-secured puts or buy call options with later expiration dates.
The gold/silver ratio is a critical indicator to watch, as it has now widened to 85:1 from an average of 80:1 in the first quarter of 2026. This indicates silver is underperforming gold amidst the flight to safety, which some traders may interpret as a sign that silver is becoming relatively undervalued. A pairs trade, going long silver and short gold, could be a consideration if one anticipates a reversion to the mean once the initial shock subsides.
We also cannot ignore silver’s strong industrial demand fundamentals, which provide a floor for the price. With global demand for solar panel manufacturing up 12% year-over-year according to the latest Q1 2026 industry reports, a sustained price drop may be limited. This underlying demand suggests any geopolitically induced weakness below key technical levels might be met with strong buying from industrial consumers.
