LONDON, March 26 (Reuters) - Euro zone bond yields rose

on Thursday as energy prices climbed again, with traders casting

a sceptical eye on conflicting claims about the status of

ceasefire talks over the U.S.-Israeli war on Iran.

Money markets also moved to price in more monetary

tightening from the European Central Bank after German

Bundesbank chief Joachim Nagel told Reuters that raising

interest rates in April is "an option".

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

to ECB rate expectations, rose 6 basis points (bps) in early

trading to 2.659%, after falling 4 bps on Wednesday. Yields rise

as prices fall and vice versa.

Iran's foreign minister said his country was reviewing a

U.S. peace plan but had no intention of holding talks on ending

the conflict, contradicting President Donald Trump's claims that

Iran was desperate to make a deal.

Oil prices rose as the two sides struggled or refused to

find a way forward, with international benchmark Brent crude

up around 3% to $105 a barrel.

Bond yields have largely moved in tandem with energy prices,

which could drive an inflationary shock that may force the ECB

to hike interest rates.

Money markets on Thursday were pricing in more than 75 basis

points of ECB hikes by the end of the year, up from around 71

priced in late on Wednesday.

ECB policymaker Nagel told Reuters that he and colleagues

will have enough information about the war's economic impact to

decide on a potential rate hike at their April 29-30 gathering.

"It is certainly an option, but just one option," he said of

an April rate increase.

Traders last saw around a 70% chance of a rate increase by

April, up from around 65% late on Wednesday.

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

the euro zone, rose 4 bps to 2.997% on Thursday, after falling 6

bps on Wednesday on reports of ceasefire talks.

Italian yields rose more than most of their peers, with the

10-year up 8 bps at 3.919%. That pushed the spread

between Italian and German 10-year yields up 4 bps

to 90 bps.

(Reporting by Harry Robertson; Editing by Ros Russell)