PRECIOUS-Gold rises as dollar, oil weaken; eyes on Middle East developments

* Oil prices ease by $2 a barrel

* Benchmark 10-year U.S. Treasury yields at highest since Feb 2025

* JPMorgan cuts 2026 gold price view (Recasts for U.S. market open)

By Anjana Anil

May 18 (Reuters) - Gold rose on Monday as a weaker U.S. dollar and lower crude oil prices eased some inflation concerns though higher bond yields curbed bullion's gains while investors continued to monitor developments in the Middle East conflict. Spot gold rose 0.7% to $4,567.49 per ounce as of 09:30 a.m. ET (1330 GMT), after hitting its lowest since March 30 earlier in the session. U.S. gold futures for June delivery added 0.2% to $4,572.40.

The dollar dipped against most major currencies, making greenback-priced bullion more affordable for other currency holders.

"The U.S. dollar index dropped to its session lows - that's a friendly element for the gold market. Also, crude oil prices have sold off a little bit," said Jim Wyckoff, market analyst at American Gold Exchange. U.S. WTI and Brent crude futures fell around $2 per barrel after reports citing Iranian media suggested a possible U.S. sanctions waiver on Iranian oil.

Oil prices have risen since the beginning of the U.S.-Israeli war on Iran, fanning inflation concerns and prompting expectations of tighter monetary policy from central banks, in place of previous bets of interest rate cuts.

Non-yielding gold, a traditional safe-haven asset and inflation hedge, tends to underperform in high interest rate environments as investors turn to investments that offer better returns, like Treasury yields.

"The rising bond yields are a bearish element for the gold and silver markets. Rising bond yields will probably limit the upside, if not cause further downside price pressure on the metals here in the near term," Wyckoff added. Government bonds globally extended losses on Monday as higher energy prices driven by the Iran war fuelled inflation concerns and reinforced expectations of global rate hikes.

Benchmark 10-year U.S. Treasury yields, which move inversely to prices, climbed to their highest since February 2025. Meanwhile, some banks have started trimming their near-term gold price forecasts due to softer investor demand, with JPMorgan among the first major lenders to cut its 2026 average gold price forecast to $5,243 per ounce from $5,708. Spot silver rose 2% to $77.5 per ounce, platinum edged 0.1% higher to $1,975.05, and palladium fell 0.6% to $1,404.75. (Reporting by Anjana Anil in Bengaluru; Editing by Emelia Sithole-Matarise)