Gold prices fell by more than 1% on Monday, influenced by a surge in energy prices that raised inflation worries and lowered expectations for interest rate cuts by the U.S. Federal Reserve this year. Spot gold fell by 1.2% to $4,439.45 per ounce as of 0102. Gold futures in the U.S. for April delivery fell by 1.2%, closing at $4,470.30. Gold has seen a decrease of about 16% this month, marking its largest monthly decline since October 2008. The decline is linked to the rise of the U.S. dollar, which has increased by more than 2% in that timeframe. The clash between Israel and Iran began on February 28.

Brent crude oil surged past $115 a barrel following the initial assaults by Yemeni Houthis on Israel over the weekend, intensifying the ongoing conflict and adding to inflationary pressures. Traders currently see a low chance of a U.S. rate cut this year, as rising energy prices could lead to broader inflationary pressures, limiting the possibility of monetary easing. This sharply contrasts with the earlier expectations of two rate cuts prior to the start of the conflict.

While inflation typically increases gold’s appeal as a safeguard, elevated interest rates apply downward pressure on the demand for the non-yielding metal. Pakistan announced on Sunday its preparations to facilitate significant discussions in the near future aimed at resolving the Iran conflict, even as Tehran expressed its willingness to respond should Washington deploy ground troops.

Meanwhile, gold demand in India saw a slight uptick last week as reduced prices drew in some buyers, though many remained cautious and looked for further price declines. In China, premiums decreased due to a decline in demand. Spot silver fell by 1.2% to $68.67 per ounce, while spot platinum dropped by 0.6% to $1,850.92, and palladium stayed steady at $1,377.12.