Updates prices

By Harry Robertson

LONDON, March 26 (Reuters) - Euro zone bond yields rose on Thursday as energy prices climbed again, with traders growing sceptical over the conflicting claims about the status of any ceasefire talks between the U.S. and 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". ECB President Christine Lagarde opened the door on Wednesday to raising interest rates if war pushes up inflation for some time.

Germany's two-year bond yield DE2YT=RR, which is sensitive to ECB rate expectations, rose 10 basis points to 2.70%, after falling 4 bps on Wednesday. Yields rise as prices fall and vice versa.

President Donald Trump on Thursday urged Iran to make a deal to end U.S. bombing, after a senior Iranian official told Reuters that Washington's proposal for ending nearly four weeks of fighting is "one-sided and unfair".

INTEREST RATES

Oil prices have risen again, with international benchmark Brent crude LCOc1 up around 6% to $108.25 a barrel.

Bond yields have largely moved in tandem with energy prices that have jumped as Iran severely disrupts oil and gas flows in the region, driving an inflationary shock that may force the ECB to hike interest rates.

Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone, rose 10.5 bps to 3.06% 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 IT10YT=RR up 16 bps at 3.99%. That pushed the spread between Italian and German 10-year yields DE10IT10=RR up to 92 bps.

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.

"Markets are appreciating U.S. efforts to seek a deal, but without concrete steps, the overarching narrative of two to three ECB rate hikes this year remains unchanged," said Michiel Tukker, senior European rates strategist at ING.

ECB policymaker Nagel told Reuters he and his colleagues will have enough information about the war's economic impact to decide on a potential rate hike in their April 29-30 gathering.

"It is certainly an option, but just one option," he said of any April rate increase.

Traders last saw around a 65% chance of a rate increase by April, broadly the same as on Wednesday.