(Updates prices, adds analyst comment)

LONDON, June 15 (Reuters) - Euro zone bond yields fell on

Monday after the U.S. and Iran reached a preliminary deal to end

their war and reopen the key Strait of Hormuz, driving oil

prices sharply lower.

Germany's 10-year bond yield, the benchmark for

the euro zone, fell to 2.945% - its lowest since late May - and

was last down 4 basis points (bps) at 2.958%.

The German two-year yield, which is sensitive to

European Central Bank interest rate expectations, fell to a

two-week trough of 2.547% and was last 5 bps lower at 2.565%.

U.S. and Iranian officials said they reached an agreement

to end the war in a preliminary pact that will lift the U.S.

blockade of Iran and open the Strait of Hormuz, through which

20% of global energy normally flows.

Oil prices fell sharply, reducing the pressure on central

banks to raise interest rates to tame inflation and helping bond

yields fall around the world.

"As Trump said that the Strait of Hormuz will be reopened on

Friday after the deal is signed, broad-based relief across

markets seems justified," said Hauke Siemssen, rates strategist

at Commerzbank.

"However, key questions about the agreement remain

unanswered as no text has been made available yet."

Kazem Gharibabadi, Iran's deputy foreign minister, said a

more extensive agreement on the wider conflict would be

negotiated during a 60-day ceasefire period.

Brent crude oil, the global benchmark, was down 5%

at $82.90, hovering around its lowest point since early March.

Money markets were pricing in around 30 bps of additional

monetary tightening from the ECB this year, down from more than

40 bps after the central bank raised interest rates last

Thursday.

"Details of the deal are not yet clear," said Mohit Kumar,

chief European economist at Jefferies, including whether the

passage through the strait would be free as well as the timeline

over which sanctions would be lifted on Iran.

"But what the market cares is whether the Strait of Hormuz

will be open and oil can start moving towards pre-war levels."

Italy's 10-year bond yield fell 5 bps to 3.682%,

hovering around a two-week low.