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 4 basis points (bps) to 2.957%, its lowest

since 2 June.

The German two-year yield, which is sensitive to

European Central Bank interest rate expectations, also fell 4

bps to a two-week low of 2.571%.

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

agreement to end the war in a preliminary pact that will lift

the U.S. blockade of Iran and crucially open the Strait of

Hormuz, through which 20% of global energy typically 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.

Brent crude oil, the global benchmark, was down 4%

to $83.80, around its lowest since early March.

Money markets were pricing in around 32 bps of further

monetary tightening from the ECB this year, down from over 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 and 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 4 bps to 3.693%.