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(Bloomberg) -- Gold declined after the US and Iran ramped up attacks over the weekend, stoking bets the Federal Reserve may need to raise interest rates to contain inflation.

Bullion was trading around $3,995 an ounce, after sliding more than 2% last week. Oil jumped after the escalation of hostilities in the Middle East, including an attack on a vital oil facility in Kuwait and the targeting of ships attempting to transit through the Strait of Hormuz.

Tehran said the ceasefire between the US and Iran has been effectively abandoned, raising the possibility of deepening disruptions to crucial energy flows through the narrow waterway.

The Iran conflict, now in its fifth month, is again driving up energy and commodity prices from fuel to raw materials used in manufacturing and food production. That's kindling fears the Fed may eventually tighten monetary policy, even as soft US economic data suggest a rate hike isn't likely in the near term. Higher borrowing costs are a headwind for non-yielding bullion.

Bank of Cleveland President Beth Hammack in a LinkedIn post on Friday joined a growing chorus of Fed officials is expressing concern over high inflation. Swap traders have priced in at least one hike by the end of the year.

Bullion has hovered in a narrow range around $4,000 in recent weeks after losing 14% in the second quarter, its worst showing since 2013.

Spot gold was 0.6% lower at $3,992.91 an ounce as of 7:30 a.m. in Singapore. Silver slid 0.4% to $55.70 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.1%.