Updates for Asia morning session

By Pablo Sinha

July 21 (Reuters) - Gold prices rose on Tuesday as investors weighed diplomatic efforts to ease the U.S.-Iran conflict, which could temper oil-driven inflation risks and influence the U.S. Federal Reserve's interest rate path.

Spot gold XAU= rose 0.9% to $4,042.69 per ounce as of 0345 GMT. U.S. gold futures GCcv1 for August delivery were up 0.8% at $4,047.40.

"It looks like gold is trying to find a base somewhere around this ($4,000) level and is going to try to re-engage the upside from there," said Ilya Spivak, head of global macro at Tastylive.

"These headlines from the Middle East seem to have some degree of knock on, though it is increasingly only being payed attention to in a passing kind of way."

Oil prices softened on Tuesday, with markets weighing reports of mediation efforts between the U.S. and Iran against an exchange of fresh attacks between the two and threats of a naval blockade of Saudi Arabia by Yemen's Houthis. O/R

The Houthis made their announcement despite signs that Tehran and Washington want to resume diplomacy to halt a worsening cycle of attacks that has all but wrecked a fragile interim agreement signed last month.

A senior Iranian official told Reuters on Monday that Tehran had received a proposal from mediators for a 10-day ceasefire in efforts to salvage the interim deal, intended to pave the way to a lasting agreement to end the war.

The recent escalation in the conflict drove oil prices to more than a one-month high on Monday, with a growing chorus of policymakers arguing interest rates may need to rise to beat back persistent inflation.

High interest rates increase the opportunity cost of holding non-yielding bullion.

While the Fed is widely expected to keep interest rates unchanged at next week's meeting, traders are currently pricing a 64% chance of a rate hike in September, according to the CME FedWatch Tool. FEDWATCH

Spot silver XAG= gained 2.2% to $57.67 per ounce, platinum XPT= was up 0.8% at $1,607.20 and palladium XPD= rose 0.8% to $1,263.73.