Euro zone bonds hold onto gains amid uncertainty over US-Iran talks

LONDON, Aug. 4 (Reuters) - Euro zone bond prices held onto the previous day's gains on Tuesday as traders weighed conflicting signals from the United States and Iran over the status of talks aimed at ending their five-month-old war.

Germany's 10-year bond yield, the benchmark for the euro zone, was flat at 3.15%. It fell 5 basis points on Monday from a near 15-year high after oil prices dropped when U.S. President Donald Trump said talks with Iran were imminent. DE10YT=RR

That revived hopes of a deal to reopen the Strait of Hormuz energy shipping route, though Iran later denied that negotiations were being held or planned.

Bond prices move inversely to yields. Since the war in the Gulf began at the end of February, European bonds have largely tracked developments in the region, particularly moves in oil and gas prices.

Policymakers are watching closely for signs that higher energy costs could feed into broader inflation pressures and require more aggressive interest-rate increases.

Those worries have weighed on bond prices, and sent yields to multi-year highs.

Other euro zone bonds were broadly in line with the benchmark on Tuesday. French 10-year yields were down a fraction at 3.93% and Italian down 1 bp at 3.94%. IT10YT=RR, FR10YT=RR

Shorter-dated debt was also little changed, with Germany's 2-year yield flat at 2.77%. DE2YT=RR