Gold dropped more than 2% to $4,020 per ounce on Monday, extending its losses for a second straight session, as escalating tensions in the Middle East stoked inflation fears and strengthened expectations that US interest rates will stay higher for longer. Over the weekend and into Monday, US and Iranian forces traded heavy missile and drone strikes. Tehran claimed it had hit US military installations across the Gulf and closed the Strait of Hormuz, driving oil prices more than 4% higher. In turn, investors ramped up bets on further Federal Reserve tightening, with futures markets now assigning nearly a 70% probability to a rate hike in September. Against this backdrop, Fed Chair Kevin Warsh is scheduled to deliver his first monetary policy testimony before Congress on Tuesday, and markets will scrutinize his comments for clues on the policy outlook. The US is also due to publish key economic indicators this week, including June’s consumer price index and retail sales data.