LONDON, March 23 (Reuters) - Euro zone government bond

yields rose on Monday, rising for the fourth day in a row, as

the escalating Iran war stoked inflation concerns and shifted

central bank interest rate expectations.

Central bankers around the world last week raised the alarm

on inflation risks as spiking oil prices and little hope for any

de-escalation of the conflict in the Middle East dominated

markets, with global bonds coming under pressure.

Iran's Revolutionary Guards said on Monday that the country

will attack Israel's power plants and plants supplying U.S.

bases in the Gulf if President Donald Trump carries out his

threat to "obliterate" Iran's power network. On Saturday, Trump

had warned that Iranian power plants would be destroyed if

Tehran failed to "fully open" the Strait of Hormuz to all

shipping within 48 hours.

"Markets look set to remain in sell-off mode as latest

headlines out of the Middle East point to prolonged energy price

increases," Commerzbank rates strategist Hauke Siemssen said in

a note.

Yields on the German 10-year Bunds, which serve

as a benchmark for the wider euro zone, were last up 2.3 basis

points to 3.0608%, after having risen to their highest level

since 2011 on Friday. Since the start of the Iran war, German

10-year yields have risen over 40 bps.

As inflation concerns have accelerated, central bank policy

expectations have been upended.

Market pricing last indicated an over 87% probability of the

European Central Bank hiking rates at its next meeting in April,

with at least three increases expected this year.

Goldman Sachs on Monday said it expects the European Central

Bank to deliver two 25 basis point interest rate hikes in April

and June.

"At the April meeting, only a few data pointers for March

will be available, which would render a potential hike a risk

management exercise and a sign of commitment to stay ahead of

the inflation curve. More hawkish-leaning council members like

Nagel seem in favour of an April hike, while centrist council

members should ultimately tip the balance," Siemssen said.

Shorter-dated bonds, which are more sensitive to policy

expectations, have been hit hardest.

German 2-year yields were last up 7.2 bps to

2.7404%, having risen around 73 bps so far this month. Yields on

the two-year Schatz were nearly 33 bps higher than they were

last Monday, making this their largest week-on-week increase

since April 2023, when markets were emerging from the regional

banking crisis.

Italian 2-year yields rose 10 bps on Monday to

3.0565%. They have jumped around 92 bps since the Iran war

began.