LONDON, Aug 11 (Reuters) - Euro zone bond yields ticked up

on Tuesday as oil prices rose after U.S. President Donald Trump

demanded Iran pay its own compensation to the U.S., further

dimming the prospect of an imminent deal to reopen the Strait of

Hormuz.

Germany's 10-year bond yield rose 2 basis points

to 3.198%, after climbing 5 bps on Monday on the back of rising

oil prices. Yields rise as prices fall and vice versa.

Trump on Monday said Iran should pay compensation for people

killed in wars, attacks and protests, in response to Tehran's

demands for compensation and an end to sanctions.

Iran earlier on Monday said it was nearing a final pact with

Oman defining new shipping lanes through the Strait, but

repeated that the U.S. must meet conditions, including

compensation, before opening the key energy waterway.

Oil prices ticked slightly higher on Tuesday, with Brent

crude up 0.5% at $88.20 after rising 5% on Monday as the

prospect of a near-term Hormuz deal slipped away.

Germany's 2-year bond yield, which is sensitive

to European Central Bank rate expectations, rose 2 bps to 2.809%

after rising 5 bps on Monday.

"We are back to the situation where there is no war ongoing,

but the Strait of Hormuz remains closed," Mohit Kumar, a senior

European economist at Jefferies, said.

"The longer the Strait is closed, more inventories will be

depleted and greater would be the impact on oil prices."

Traders in money markets were last pricing in 41 bps of

further ECB monetary tightening this year, up from 37 bps late

on Friday.

Bond markets were also waiting for Wednesday's U.S. CPI

inflation report, which will influence the Federal Reserve's

rate decisions and have knock-on effects for bond markets around

the world.

Italian and French 10-year bond yields

were both up 3 bps.