(Bloomberg) -- Gold fell sharply and was close to wiping out this year’s gains, as the war in the Middle East entered its fourth week and the US and Iran traded threats of new attacks.

Bullion plunged as much as 3.8% to near $4,320.30 an ounce — less than a dollar above where it ended last year. Since the conflict began, surging oil prices have raised inflationary risks and reduced prospects for near-term interest-rate cuts by the US Federal Reserve and other central banks. This is a headwind for non-yielding gold, which has fallen for eight consecutive sessions and just posted its biggest weekly drop since 1983.

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Gold’s choppy opening mirrored the broader market, with crude retreating after an initial small gain and equity markets also volatile. In the three weeks since the war began on Feb. 28, bullion’s decline has been driven partly by forced selling as investors seek to cover losses elsewhere in their portfolios. The metal ended last year at $4,319.37 an ounce.

Over the weekend, US President Donald Trump gave Iran a two-day deadline to reopen the Strait of Hormuz or have its power plants bombed. Iran countered that it would close the strategic waterway “completely” and target energy, information technology and desalination infrastructure if its power facilities come under attack. Trump’s ultimatum came at 7:44 p.m. New York time on Saturday.

“Gold is primed for a bounce in the short term” due to technical reasons, said Kyle Rodda, an analyst at Capital.com Inc. Much will depend “on whether Trump follows through with his threats to hit Iranian power plants,” he said.

Bullion’s 14-day relative-strength index — a gauge of momentum — extended a fall below 30, a level that some traders see as indicating it’s oversold. Hedge funds and other large speculators increased their net-long position for gold to the highest in seven weeks as of March 17, weekly US government data published Friday showed.

Spot gold plunged 3.3% to $4,343.40 an ounce at 9:00 a.m. in Singapore. Silver slipped 3.4% to $65.61. Platinum and palladium also fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1%.

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