Euro zone bond yields rise; Iran optimism wears thin

German 10-year yields DE10YT=RR traded at 3.11% on Thursday, up just 1 basis point from Wednesday's close, while 2-year yields DE2YT=RR rose 2 bps to 2.73%.

That said, crude futures are some 10% above where they were before the war broke out in late February, while European physical crude prices are still anywhere between 18% and 25% above those levels, which could curtail further rallies in bond prices, analysts said.

"A deal could see 10-year U.S. Treasuries moving back towards 4.5% and 10-year Bunds towards 3%, but we do not see a rally much beyond that. Our base case remains that oil would likely settle in the $75-$80 range, which is still a good 25%-30% higher than pre-war levels and would need to be factored into growth and inflation expectations," Jefferies strategist Mohit Kumar said.