Gold prices fell more than 3% on Monday, continuing their downward trend to around a four-month low, influenced by escalating tensions in the Middle East that raised concerns about inflation and sparked expectations of higher global interest rates. Spot gold fell by 3.3% to $4,340.09 per ounce as of 0100, extending losses for the ninth consecutive session. The metal fell on Monday to its lowest point since January 2, suffering a loss of more than 10% last week. U.S. gold futures for April delivery fell by 5% to $4,347.

Iran has escalated the ongoing conflict that has lasted for three weeks, declaring on Sunday its plan to strike the energy and water infrastructure of its Gulf neighbors. This statement follows a caution given by U.S. President Donald Trump the day before, suggesting a possible attack on Iran’s electricity infrastructure within a 48-hour period. The Revolutionary Guards of Iran have declared that any assault on Iranian power facilities will lead to the total shutdown of the Strait of Hormuz, which will stay closed until the affected power plants are entirely rebuilt.

Oil prices stayed high, exceeding $110 a barrel, as market participants evaluated the impact of U.S. and Iranian threats to energy infrastructure, which could escalate the conflict regarding the possible release of millions of barrels of Iranian oil into global markets. The closure of the Strait of Hormuz has kept crude prices high, leading to inflation through rising transportation and manufacturing costs. Although increasing inflation typically boosts gold’s appeal as a safeguard, high interest rates dampen the demand for the asset that does not generate income.

Meanwhile, market pricing for a U.S. Federal Reserve interest rate hike this year has increased, now seeming much more likely than a rate cut, with interest rate futures suggesting about a 27% chance of a rate hike by December, according to the CME FedWatch tool. Spot silver fell by 3.3%, closing at $65.55 per ounce. Platinum prices fell by 4.4% to $1,838.45, and palladium saw a slight drop of 0.4% to $1,398.50.