TOKYO, March 23 (Reuters) - Benchmark Japanese

government bond yields climbed to a two-month high on Monday as

renewed inflation fears, driven by the escalating U.S.-Israeli

war with Iran, rattled markets.

The benchmark 10-year JGB yield

rose 5.5 basis points (bps) to 2.315%, the

highest since January 21. Yields move inversely to bond prices.

"If the situation in Iran, particularly a blockade of the

Strait of Hormuz, persists, there is a possibility that a rate

hike will be implemented based on the risk that high oil prices

and a weak yen could push up underlying inflation," Noriatsu

Tanji, chief bond strategist at Mizuho Securities, said in a

note.

The 20-year JGB yield climbed 6 bps

to 3.180%, the highest since February 5, while the five-year

yield rose 5 bps to 1.720%, also its highest in

more than a month. The two-year yield, which is

the most sensitive to Bank of Japan policy rates,

increased 2.5 bps to 1.29%.

Other tenors were yet to be traded as of 0046 GMT.

Iran said on Sunday it would strike the energy and water systems

of its Gulf neighbours if U.S. President Donald Trump followed

through with a threat to hit Iran's electricity grid in 48

hours, extinguishing any hope of an early end to the war, now in

its fourth week.

Trump on Sunday said Iran had 48 hours to open the vital

strait, which is effectively closed for most vessels.

(Editing by Stephen Coates)