Gold was on track for its biggest weekly ‌loss in six on Friday, as escalating U.S.-Iran clashes lifted oil prices, adding to inflationary pressures and strengthening the case for higher U.S. interest rates.

Spot gold was up 0.5% at $3,988.20 per ounce by 0313 GMT, ​having touched its lowest since July 1 earlier in the session. U.S. gold ​futures for August delivery were steady at $3,992.

The metal, however, has lost 3.2% ⁠so far this week, its largest decline since June 1, with the ongoing Middle East ​tensions outweighing support from softer June U.S. inflation figures released this week.

"Even with tamer CPI and ​PPI figures, the oil price spike this week meant traders simply couldn't celebrate the cooler inflation numbers," said Tim Waterer, chief market analyst at KCM Trade.

"Geopolitical risks in the Middle East are still present, with ​inflation and yield concerns being the dominant forces holding gold back."

Iran and the United ​States exchanged intensifying fire on Thursday in a week-long escalation that has largely unravelled last month's truce.

Oil prices have ‌jumped ⁠about 12% so far this week due to limited oil flows out of the Strait of Hormuz, with Tehran asking the Houthi movement to stand ready to shut the Red Sea export route.

The surge in oil prices risks reigniting inflation worries and increasing the likelihood of ​interest rate hikes. Non-yielding ​gold typically struggles in ⁠a high-interest-rate environment as investors gravitate toward assets that offer better returns.

Dallas Federal Reserve President Lorie Logan became the first of Fed Chairman ​Kevin Warsh's new colleagues to call publicly for a rate hike.

Fed ​Vice Chair Philip Jefferson ⁠also suggested he would be open to raising rates if there is no near-term improvement in inflation.

Traders are currently pricing a 73% chance of an interest rate hike in December, according ⁠to the ​CME FedWatch Tool. FEDWATCH

Elsewhere, spot silver fell 0.5% to $55.22 per ​ounce, platinum lost 0.7% to $1,605.62, and palladium eased 0.4% to $1,244.86. All three metals were headed for a weekly ​loss.