(Updates prices)

By Harry Robertson

LONDON, June 10 (Reuters) - Euro zone bond yields rose

slightly on Wednesday as oil prices showed little reaction to

the U.S. and Iran trading attacks that analysts said appeared

limited.

Traders were also waiting for key U.S. inflation data later

in the day and the European Central Bank's interest rate

decision on Thursday, widely expected to deliver a hike.

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

the euro zone, inched up less than 1 basis point (bp) to 3.064%.

The 2-year yield, sensitive to ECB rate

expectations, climbed 2 bps to 2.699%.

The two-year yield has risen around 17 bps this month as

strong U.S. jobs data boosted expectations for Federal Reserve

rate increases, lifting global yields in turn.

A stalling in U.S.-Iranian peace talks has kept oil prices

above the $90 mark, underpinning yields.

The U.S.-Iran ceasefire came under renewed strain on Tuesday

and Wednesday as the two sides exchanged fire after Iran downed

a U.S. helicopter over the Strait of Hormuz.

Oil market reaction to the latest flare-up was subdued, with

Brent crude last down 0.2% to $91.24 a barrel.

"On the positive side, talks are still ongoing, and a U.S.

spokesperson stated that the traffic through the Strait of

Hormuz is picking up," said Mohit Kumar, chief European

economist at Jefferies.

"Oil prices were lower despite the rise in geopolitical

tensions."

U.S. consumer price index data later in the day could steer

global yields. CPI is expected to have risen 4.2% year-on-year

in May, from 3.8% in April, as the war pushed up energy costs.

In the euro zone, the ECB is expected to raise rates by 25

bps on Thursday in response to the inflation surge, with

investors watching for guidance beyond June.

Money markets on Wednesday were pricing in around 68 bps of

tightening this year, implying two rate hikes and roughly a 70%

chance of a third.