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Gold held steady on Thursday, pulling back from two-week highs hit in the previous session, as an escalating Middle East conflict drove oil prices higher, while traders shifted focus to next week's Federal Reserve meeting for clues on the timing of potential interest rate hikes.

Spot gold was little changed at $4,132.01 per ounce as of 0324 GMT, having climbed to $4,165.87 in the last session, its highest since July 7. U.S. gold futures for August delivery fell 0.4% to $4,134.60.

"Oil continues to be up, adding to pressures of inflation and expectations of Fed interest rate hikes, capping a positive undertone in gold as the dollar weakens," said Jigar Trivedi, a senior research analyst at IndusInd Securities.

Oil prices rose to their highest in more than six weeks, with the United States launching a new round of strikes on Iran and Yemen's Houthis targeting oil tankers in the Red Sea.

The dollar eased 0.1%, making greenback-priced bullion more affordable for holders of other currencies.

Interest rate sensitive two-year U.S. Treasury yields climbed to a 17-month high as rising oil prices stoked concerns that renewed energy disruptions could reignite inflation and increase the odds of Fed interest rate hikes.

The Fed meets next week, when the central bank is widely expected to keep interest rates unchanged, although futures markets are broadly positioned for at least one rate hike by year end.

Traders are currently pricing a 77% chance of an interest rate-hike in September, according to the CME FedWatch Tool.

High interest rates tend to diminish the appeal of non-yielding bullion.

The European Central Bank is all but certain to keep interest rates unchanged on Thursday but will hold the door wide open to another rate hike in September.

Spot silver was up 0.3% at $59.90 per ounce, platinum gained 0.7% to $1,656.24 and palladium rose 0.8% to $1,301.25.