July 14 (Reuters) - Gold fell to a two-week low on Tuesday as the conflict between the United States and Iran in the Gulf sent oil prices soaring and fueled inflation fears.

Gold fell 0.2 percent to $3,993.83 an ounce by 0110 GMT in spot trading, after losing nearly 3 percent in the previous session, its biggest one-day percentage drop in more than a month. U.S. gold futures for August delivery settled at $4,000.70.

The US military continued its strikes on Iran for the third night in a row on Monday, and two tankers were fired upon in the Strait of Hormuz, after US President Donald Trump announced that Washington would resume its blockade of Iranian shipping in the Gulf.

Oil futures reached their highest level since mid-June, after jumping nearly nine percent in the previous session, while US Treasury yields and the dollar rose as the conflict between the United States and Iran reignited at the start of the week.

Investors are closely watching the U.S. Consumer Price Index (CPI) data for June, due later today, for fresh clues about inflation and the Federal Reserve's (the U.S. central bank) path on interest rates, with attention also focused on the Producer Price Index (PPI) data and Federal Reserve Chairman Kevin Warsh's first semiannual testimony before Congress this week.

Christopher Waller, a member of the Federal Reserve Board of Governors, said on Monday that the bank might need to raise interest rates "in the near term" if upcoming data shows inflation remaining well above the target of 2 percent, describing monetary policy as being at a "crossroads".

Traders have increased their bets on a US interest rate hike in September. The CME FedWatch tool showed a 78% probability of a rate increase, up from 57% a week earlier.

As for other precious metals, silver fell 1.2 percent in spot trading to $56.98 an ounce, after earlier hitting its lowest level in two weeks. Platinum dropped 1 percent to $1,589.35, and palladium declined 0.4 percent to $1,242.54.