(Updates with European trading)

* Oil prices fall below $100 a barrel

* Dollar eases as investors move out of the safe-haven

currency

* US markets closed for Memorial Day holiday

By Noel John

May 25 (Reuters) - Gold rose more than 1% on Monday as

hopes of a peace deal to end the Iran war sent the dollar and

oil prices lower, easing fears of inflation and

higher-for-longer interest rates.

Spot gold was up 1.1% at $4,559.69 an ounce by 0931

GMT and U.S. gold futures for June delivery gained 0.9%

to $4,561.30. U.S. markets were closed for Memorial Day.

The market remained optimistic despite the U.S. and Iran playing

down the chances of an imminent deal after U.S. President Donald

Trump had said on Saturday that the two countries had largely

negotiated a memorandum of understanding on an agreement that

would reopen the Strait of Hormuz.

The two sides remain at odds on several difficult issues

that must be resolved if they are to bring an end to the

three-month-old war.

Equities rallied while oil prices fell below $100 a barrel

and hit two-week lows, with the dollar hovering around a

one-week low.

"Financial assets are strongly influenced by oil prices at

present, and gold prices are not an exception," said UBS analyst

Giovanni Staunovo.

"Lower oil prices lift gold, in anticipation that it impacts

the monetary policy of the Federal Reserve," Staunovo said,

adding that he expects this trend to continue in the near term.

Gold has fallen by about 14% since the Iran war began in

late February, supported by elevated energy prices that have

sparked inflation concerns and the prospect of higher U.S.

interest rates.

Traders now see a 40% chance of the Fed raising U.S.

interest rates by 25 basis points in December. That represents a

sharp shift from expectations before hostilities erupted, when

economists widely predicted two rate cuts this year.

Kevin Warsh was sworn in as chair of the U.S. Federal Reserve on

Friday at a pivotal moment for the American economy as surging

gasoline prices resulting from the Middle East conflict fuel

inflation and erode consumer sentiment.

Spot silver climbed 3.1% to $77.86 an ounce, platinum

rose 2.1% to $1,962.93 and palladium was up 2.8%

at $1,386.47.