LONDON, May 5 (Reuters) - Euro zone government bond

yields were a touch lower on Tuesday, in line with softer oil

prices following a sharp selloff the previous day, with

investors focused on developments in the Strait of Hormuz.

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

zone was down 1 basis point at 3.07% after a 5 bp jump the

previous session.

Government bond market traders are closely tracking the

situation in the Gulf as they assess when central banks will be

forced to raise interest rates to prevent sky-high energy prices

spilling over into broader inflation.

The European Central Bank kept rates unchanged last week,

but it debated a rate hike and signalled that policy tightening

might be necessary in June.

Bond yields rose sharply on Monday driven by a jump in oil

prices after the U.S. and Iran launched new attacks as they

wrestled for control of the Strait of Hormuz.

Brent crude futures retreated on Tuesday but held near $114

a barrel.

Germany's rate-sensitive two-year yield was down 2 basis

points at 2.69%, just off last week's one-month high of 2.76%.