Gold prices fell on Monday, as renewed tensions in the Middle East threatened to rekindle inflation fears and support expectations for elevated interest rates, a trend which may not bode well for non-yielding assets like bullion.

By 07:15 ET (11:15 GMT), spot gold had fallen by 1.3% to $4,035.82 an ounce, while gold futures had declined by 1.1% to $4,049.92 an ounce.

The U.S. and Iran have agreed to cease tit-for-tat strikes in the Strait of Hormuz, allowing ships to freely traverse the vital waterway, according to media reports.

Citing a U.S. official, The New York Times reported that Iran has yet to confirm such an agreement.

But talks are set to continue on the details of putting a memorandum of understanding between Washington and Tehran into practice, the paper said.

The U.S. has offered to hold talks with Iran in the Qatari capital of Doha, The Wall Street Journal also reported, adding that while the particulars of the summit have yet to be finalized, the gathering could take place as early as Tuesday.

Axios was the first to report on an agreement to cease fighting and restart talks.

Oil prices steadied at around pre-war levels, but an uptick following the latest hostilities kept worries of an energy-induced inflation wave in play. Predictions also remain that central banks, including the Federal Reserve, will raise interest rates before the end of the year to corral price pressures.

"[T]here’s still plenty of risk facing the oil market. Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance," analysts at ING said in a note.

"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow[.]"

At the same time, gold was being dragged down by strength in the U.S. dollar, which can make the yellow metal more expensive for overseas buyers. The greenback has been viewed as a relative safe haven through the Iran war, buoyed in part by the belief that the U.S. economy, as a major energy exporter, may be somewhat insulated from a recent spike in oil prices.

Upcoming data could provide a fresh glimpse into the state of the American economy. The monthly U.S. employment report is due out this week, along with figures tracking consumer confidence, job openings, and private payrolls.