Spot gold was down ​0.7% at $4,716.70 per ounce

Gold prices hit a near one-week low on Monday, while a surge in oil prices following failed Iran-U.S. peace talks fuelled inflation worries.

Spot gold was down ​0.7% at $4,716.70 per ounce, as of 0445 GMT, its lowest level since April ​7.

The dollar firmed ⁠0.4%, while oil prices bounced back above $100 a barrel, as the U.S. reportedly planned ​a blockade of the Strait of Hormuz that could restrict oil shipments, following the U.S. ​and Iran’s failure to reach a deal to end the war.

Iran responded by warning that military vessels approaching the Strait will be considered a ceasefire breach and dealt with harshly and decisively.

Ceasefire ​optimism has unwound following the failure of the peace talks, and the resulting push ​higher by the dollar and oil prices has put gold on the back foot again, said Tim ‌Waterer, ⁠chief market analyst, KCM Trade.

Spot gold has dropped more than 11% since the U.S.-Israeli war on Iran began on February 28. While inflation and geopolitical risks boost gold’s appeal as a hedge, higher interest rates weigh on the non-yielding metal.

A stronger U.S. currency also makes ​dollar-priced bullion more expensive ​for holders of ⁠other currencies.

As soon as oil prices push back above $100, attention quickly turns to potential central bank rate hikes to curb inflation, and ​it is this interest rate outlook that is undermining gold’s performance, ​Waterer said.

U.S. traders ⁠now see little chance of a rate cut this year, as higher energy prices threaten to feed into broader inflation and limit the scope for monetary easing. Before the war in ⁠the ​Middle East began, there were expectations for two ​rate cuts this year.