Gold fell to an 11-week low on Wednesday, as the dollar and oil prices rose on renewed hostilities between the U.S. and Iran, fuelling concerns about inflation and interest rate hikes.

Spot gold was down 1.9% at $4,181.04 per ounce by 0414 GMT, after ⁠hitting its lowest level since March 23. U.S. gold futures for August delivery shed 1.9% to $4,204.70.

The dollar rose, making greenback-priced bullion more expensive for holders of other currencies. Oil prices jumped 1%, stoking concerns around inflation ‌and cementing expectations that interest rates would stay higher for longer.

"The driver really is the shift in Federal Reserve policy expectations, the rise in yields and ‌the rise in the dollar. I think all of those ‌things are weighing on gold," said Ilya Spivak, head of global ‌macro at Tastylive.

The United States ‌on Tuesday launched strikes against Iran after President Donald Trump said Tehran had shot down a U.S. Apache helicopter in the ‌Strait of Hormuz, deepening doubts over a potential peace deal ⁠and further straining a fragile truce. Iran's Revolutionary Guards said they had carried out attacks against a U.S. base in Jordan and 21 other targets in the Gulf on ⁠Wednesday in retaliation ⁠for the American strikes.

Traders are now pricing in a more than 70% chance of a U.S. rate hike by December, according to the CME FedWatch ⁠tool.

While gold is seen as a hedge against inflation, higher rates tend to weigh on the non-yielding metal.

Markets are awaiting key U.S. inflation reports this week, including the May Consumer Price Index data later in the day and the Producer Price Index reading on Thursday, to gauge ‌the Fed's monetary policy stance.

"If we can break the $4,100 level, I think the path of resistance fundamentally changes for gold, and we might be starting to look at $3,500 as the next level into the end of the year," Spivak said. Spot silver fell 2.1% to $64.01 per ounce, platinum dropped 3.4% to $1,667.92, and palladium fell 1.5% to $1,204.24.

Gold drops as oil rises on renewed US-Iran hostilities