(Updates moves, adds context)

LONDON/GDANSK, May 21 (Reuters) - Euro zone government

bond yields rose on Wednesday as higher oil prices added to

pressure on longer-dated bonds, already struggling globally due

to worries about countries' fiscal positions, particularly the

U.S.

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

rose 4 basis points to 2.637%, while Italy's 10-year yield was

up 3 basis points to 3.645%.

Partly responsible for the move was oil, as Brent futures

rose nearly 2% earlier on Wednesday, before paring some

gains to trade up half a percentage point, after reports that

Israel could be preparing to strike Iranian nuclear facilities.

This, combined with stronger than expected British inflation

data was "helping to hoist bond yields across the curve,"

Kenneth Broux, head of corporate research FX and rates at

Societe Generale, said in a note.

Britain's annual inflation rate hit 3.5% in April, its

highest reading since January 2024.

Even with inflation near the European Central Bank's 2%

target, the bank's rate setters are still keeping a wary eye on

it when setting policy.

Markets expect the ECB to cut its key rate to 1.74% by the

end of this year; those expectations had been nearer 1.5% last

month at the height of worries about the global economic hit

from tariffs.

Yields in Europe have been moving higher this week, dragged

along by U.S. Treasury yields, which have been rising on

concerns about the U.S. fiscal position as a tax cutting bill

works its way through Congress.

The U.S. 10-year yield was last up more than 5 bps at

4.535%.

An auction of 20-year Treasuries later in the day

might give an indication of investor appetite for

long-dated U.S. debt.

Longer-dated bond yields have been rising more than

shorter-dated ones as investors demand a greater premium to hold

longer-dated debt.

That has caused yield curves to steepen, in market parlance,

leading the German two-10 yield curve to hit its steepest in a

month earlier in the session, with the 10-year yield 79 bps

higher than the two-year.

If energy prices stay permanently higher, "it is potentially

another stone in the sticky inflation and bear steepening pond,"

Broux said.

Yield curves "bear steepen" when the gap between longer and

shorter dated yields increases because longer-dated yields are

rising.

Japanese super-long yields have also moved sharply higher

this week, and the 30- and 40-year yields hit new all-time peaks

on Wednesday.

Trading Wednesday was also complicated by a Bloomberg

Terminal outage which disrupted numerous government bond sales,

according to several European debt management offices.