* Euro zone bond yields nudge higher

* Traders weigh hawkish shift from Fed

* Markets pricing in one more ECB rate hike this year

(Updates throughout)

By Sophie Kiderlin

LONDON, June 18 (Reuters) - Euro zone bond yields picked up

on Thursday as traders weighed a hawkish shift from the Federal

Reserve in a busy week for global central banks, while the U.S.

and Iran said they signed a deal that would reopen the Strait of

Hormuz.

Yet some tensions appeared to remain, even as the U.S. and

Iran released an interim agreement to end the war, with

President Donald Trump threatening to resume attacks and kill

Iranian officials if they failed to honour their commitments.

Brent crude futures were last down around 1.2% at

$78.57 a barrel, trading around early-March levels.

The yield on the German 10-year bond, the

benchmark for the euro zone, rose roughly one basis point to

2.9359% after declining for five consecutive days. That price

rally - yields move inversely to prices - was the longest since

mid-February and came as optimism about the Iran war ending

grew.

The conflict has seen government bonds come under pressure,

with yields jumping as the outlook for inflation and interest

rates shifted due to the war-related oil price shock.

The German 10-year bond yield is still close to 30 basis

points above its pre-war levels.

EYES ON CENTRAL BANKS' REACTIONS TO IRAN WAR

Another driving force for markets this week has been central

bank interest rate decisions, especially the eagerly anticipated

debut meeting for new Federal Reserve Chairman Kevin Warsh.

As expected, the Fed held interest rates steady on

Wednesday. But new quarterly projections showed that nine

policymakers now see a hike in rates by the end of 2026. And an

updated policy statement removed language that had been used to

flag the likelihood of further reductions in borrowing costs

this year.

Short-term U.S. Treasury yields rose sharply on Wednesday as

expectations for tighter Fed policy grew.

Warsh was appointed by Trump earlier this year with an

expectation that he would deliver the rate cuts the president

has called for. And markets have been eager to see how the new

Fed chair would approach policy-making.

"Aside from the (unanimous) decision itself, Warsh already

left some marks," said Erik Liem, rates strategist at

Commerzbank.

"The monetary policy statement is much more streamlined and

concise," he noted, adding that the Fed would restrict its

communication to key information.

Liem also pointed out that Warsh does not seem to think

forward guidance is a good tool.

Attention on Thursday was also on central banks elsewhere,

with the Swiss National Bank and Bank of England both leaving

rates unchanged.

Their decisions come after the European Central Bank last

week raised rates, with the Bank of Japan following suit earlier

this week.

Markets have been paying close attention to comments from

policymakers as they have tried to assess what impact the Iran

war might have on the economy, with worries about rising

inflation, higher rates and weaker economic growth taking hold.

Money markets were last pricing in at least one more rate

hike from the ECB this year, with a chance of a second.

The yield on the German 2-year bond, which is more sensitive

to rate and inflation expectations, was last up 4.6 basis points

to 2.6296%.