PRECIOUS-Gold steady as markets track Iran tensions, await Fed decision

* Iran rejects de-escalation offers

* Israel's Katz says Iran's security chief killed

* Oil prices jump more than 1% (Updates prices)

By Ashitha Shivaprasad

March 17 (Reuters) - Gold prices held nearly steady on Tuesday, as market participants monitored the intensifying Iran conflict and awaited the U.S. Federal Reserve's upcoming policy decision.

Spot gold was little changed at $5,003.11 per ounce by 12:25 p.m. ET (1625 GMT). U.S. gold futures for April delivery rose 0.1% to $5,007.70.

The gold market reflected "a balancing act" between safe-haven demand on heightened geopolitical uncertainty and bearish pressures from inflation, said Jim Wyckoff, senior analyst at Kitco Metals. "I think gold will probably make new record highs, but I suspect it won't be anytime soon. I think the bulls have just run out of gas," he added.

Bullion is considered a safe asset during periods of uncertainty and inflation, but becomes less attractive in a high-rate environment as it yields no interest.

The U.S.-Israeli war on Iran, now in its third week, has led to severe disruption of energy trade and stoked fears of a spike in inflation.

Israel claimed on Tuesday it killed Iran's security chief, while a senior Iranian official said the new supreme leader had rejected de-escalation offers conveyed by intermediaries, demanding Israel and the U.S. first be "brought to their knees."

International oil prices rose more than 1% for the day.

The U.S. Federal Reserve is expected to announce its decision on interest rates on Wednesday and investors expect the central bank will keep rates steady.

Commerzbank, in a note, said that the Fed meeting is unlikely to provide impetus to gold, as uncertainty surrounding the duration of the war and the disruption to oil supplies is likely to make the Fed cautious.

Among other metals, spot silver fell 1.9% to $79.2 per ounce, after falling 3% earlier in the session, while platinum gained 0.5% to $2,125.10 and palladium rose 0.9% to $1,612.09. (Reporting by Ashitha Shivaprasad in Bengaluru; editing by Barbara Lewis and Diti Pujara)