UPDATE 2-Oil rises more than 1 pct as dollar swings lower

* Iran war games aim to protect nuclear facilities

* Dollar edges down 0.5 pct against basket of currencies

* Investors eye data in holiday-thin week for recovery clues

* China Oct apparent crude demand up 10 pct on year (Recasts, updates prices, analyst's comments)

By Fayen Wong

PERTH, Nov 23 (Reuters) - Oil prices rose more than 1 percent to top $78 a barrel on Monday, after the U.S. dollar lost its footing and heightened tensions between key oil exporter Iran and Western nations raised speculation of a potential supply threat.

The dollar, down 0.5 percent against a basket of currencies .DXY, was also a key factor in driving up prices of other commodities, with gold XAU= powering to a fresh record high of more than $1,160 an ounce. [GOL/]

Investors typically buy commodities as a hedge against inflation and a weaker U.S. currency.