Gold was on track for the biggest weekly loss since early June as renewed hostilities in the Middle East raised the odds that the US Federal Reserve may need to raise interest rates to contain inflation.

The precious metal declined as escalating strikes near the Strait of Hormuz intensified geopolitical risk, paradoxically strengthening the dollar and Treasury yields. Higher rates increase the opportunity cost of holding non-yielding bullion, pressuring prices lower despite traditional safe-haven demand.

Traders now see elevated probability of additional tightening by the Fed as energy supply disruptions threaten to reignite price pressures. The weekly drop marks a sharp reversal from last month's rally, highlighting gold's sensitivity to shifting rate expectations.