(Updates pricing after European morning, adds quote, additional

context)

By Sophie Kiderlin

LONDON, April 29 (Reuters) - Euro zone bond yields

traded around multi-week highs on Wednesday as efforts to end

the Iran war appeared to be in a stalemate and oil prices nudged

higher again, prompting persistent inflation worries.

German 10-year bond yields, the benchmark for the

euro zone, were last 1.3 basis points higher at 3.0738%. They

hit a two-week high of 3.0860% in the previous session.

The rate-sensitive German 2-year bond yield meanwhile

was 4.4 bps higher at 2.6825%, trading around levels last seen

on April 7.

Bonds have come under renewed pressure in recent sessions, with

yields steadily ticking higher, as efforts to end the war in the

Middle East seem to be at an impasse. U.S. President Donald

Trump on Wednesday urged Iran to 'get smart soon' and sign a

deal.

Meanwhile, oil prices have been grinding higher as the crucial

Strait of Hormuz remains effectively shut. Brent crude futures

for June rose for the eighth day in a row on Wednesday

and were last up around 2.8% at $114.4 a barrel.

Higher energy prices have fed into inflation fears, which were

underscored Tuesday by an ECB survey which showed inflation

expectations for one year ahead had jumped to 4.0% in March from

2.5% a month earlier. On Wednesday, data showed that euro zone

economic sentiment plunged to a three-and-a-half-year low this

month.

Preliminary inflation data for April due this week from

across the euro zone will provide insights into the economic

impact of the war so far. In March, euro zone inflation jumped

to 2.6%, and according to a Reuters poll of economists, the

figure will likely have increased again in April.

The euro zone-wide data will be published not long before the

European Central Bank's latest interest rate decision on

Thursday. Preliminary data out of Germany is meanwhile due

Wednesday. Earlier in the day, preliminary figures showed that

inflation rose in three key German states in April, suggesting

the national rate may have also increased.

While the ECB is broadly expected to leave interest rates

unchanged this month, money markets were last pricing in roughly

three rate hikes from the central bank by the end of the year.

After Thursday's meeting, "we will wait until the next

meeting in June. Obviously, the main factor will be how the war

in Iran develops, how energy prices will develop. I think the

ECB wants to collect more data. They will also have new

forecasts in June. If they want to hike, that would be the

date," Felix Schmidt, senior economist at Berenberg, said.

Investors will also be watching closely for any comments

from policymakers about the impact of the Iran war on the

economy and monetary policy.