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(Bloomberg) -- Gold wavered after a four-day rally, as traders weighed the escalating war in the Middle East against a stronger US dollar.

Bullion fell as much as 0.8%, having earlier advanced 1.1%. A gauge of the US dollar has gained almost 1% so far this week, making gold more expensive for most buyers, while rising US Treasury yields also weighed on precious metals, which don’t pay interest. Silver plunged as much as 7.1% on Tuesday.

The conflict in the Middle East has supported gold, which gained more than 3% over the previous four sessions as investors were drawn to safer assets. President Donald Trump said the US would continue its military offensive for as long as it takes, and Israel announced a “wave of strikes” targeting Iran’s command centers. Tehran, meanwhile, has attacked oil and gas infrastructure and threatened shipping in the strategic Strait of Hormuz.

But the resulting spike in energy prices — benchmark Brent crude topped $80 a barrel on Tuesday — has stoked inflation fears in the US and raised the likelihood that the Federal Reserve will leave interest rates unchanged for longer, a delay that would be a headwind for gold. Traders are now pricing in a rate cut by September, later than previously estimated.

Even before the US-Israeli attacks on Iran over the weekend, there were signs that US inflation was set to rise. Manufacturing input prices soared in February at the fastest pace since 2022, according to a gauge from the Institute for Supply Management. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned that inflation could become a “skunk at a party” for the US economy.

Gold has rallied by nearly a quarter this year, with demand supported by persistent geopolitical and trade tensions as well as concerns about the Fed’s independence. The revival of a broader retreat from bonds and currencies, known as the debasement trade, has added fresh impetus to a multiyear rally.

There’s “ample scope” for bullion to challenge a record high above $5,595 an ounce that it hit at the end of January, should the conflict in the Middle East extend for several weeks, Swiss private bank Union Bancaire Privee, UBP SA said in a note. On Monday, the metal closed at its highest in over a month.

However, if the situation remains in check, gold could lose some of its upward momentum, said Han Xiao, general manager of Zhishui Investment Management Co., a Chinese fund manager. “The impact of geopolitical events, especially wars, tends to be front-loaded and realized quickly,” he said, “If the situation does not escalate further, the influence on precious metals may gradually diminish over time.”

As well as disrupting energy supplies, the war has created bottlenecks for the physical flow of precious metals. The United Arab Emirates, a major conduit for global gold trade, closed its airspace over the weekend, while several commercial airlines suspended operations in the Gulf region — grounding shipments of gold and silver that are transported in the cargo holds of passenger aircraft.

Representatives of several trading and logistics firms said their metal shipments to and from Dubai had been paused indefinitely. Land transport to airports in other parts of the region is often not possible, as keeping expensive metal on the road is seen as a major risk, the people said, on condition of anonymity because they are not authorized to speak to the media.

In further developments on Tuesday, the American embassy in the Saudi Arabian capital, Riyadh, came under attack from two drones as Iran stepped up strikes on the kingdom in retaliation against the US and Israel. Trump told a news outlet that the US would hit back.

Spot gold edged down 0.1% to $5,316.38 an ounce as of 3:35 p.m. in Singapore. Silver fell 3.4% to $86.37. Platinum and palladium also declined.

--With assistance from Masaki Kondo.