Euro zone yields fall on US-Iran ceasefire deal hopes

* Inflation data mixed in ​major euro ⁠zone economies

* ECB seen likely to hike interest rates in ​June

* Iran deal hopes, oil prices driving rate expectations

LONDON, May 29 (Reuters) - Germany's 10-year bond yield dropped to its lowest level in ​seven ‌weeks on Friday as traders became more hopeful the U.S. and Iran would reach an agreement that would reopen the crucial Strait of Hormuz.

Bonds across ⁠the euro zone rallied in late afternoon trading in Europe, sending yields ⁠lower, after U.S. President Donald Trump said in a ​social media post that he would be meeting with officials in the White House on Friday to make a final decision on a deal. Germany's 10-year bond yield, the benchmark for the euro zone, dropped to as low as 2.926%, down around 3 basis points on the ​day, its lowest ‌level since April 8. It has fallen 10 bps this week as hopes about a deal grew. The two-year German bond yield - more sensitive to ECB interest rate expectations - dropped by a similar amount to 2.53%.

Rate expectations have been swinging on headlines from the Gulf and resulting moves in oil prices, as traders try to assess whether high energy costs will spill over into broader price rises.

"In ​terms of market reactions, if a deal is agreed upon, we should see another leg higher in risky assets and lower in rates. ‌However, positioning suggests that the rates market should see a greater reaction than equities," Mohit Kumar, chief European economist at Jefferies, wrote in a note before Trump's social media post.

EUROPEAN INFLATION ‌DATA PROVIDES MIXED PICTURE Data released on Friday showed inflation in the euro zone's four largest economies hovered above the ECB's 2% target for a third straight month in May.

But the picture was somewhat mixed as German figures were cooler than expected, the Spanish reading ​was hotter than expected, as was Italy's. In France, inflation came in below the forecast but crept higher on a month-over-month basis. That data did little to ‌change expectations of an ECB rate hike next month, which money markets see as all but certain. However, they have turned more sceptical about policy tightening later in the year, pricing a second hike by October, but only seeing a small chance of a third move ⁠by the ⁠end of the year. Underscoring policymakers' concern about inflation, ECB research on Friday showed euro zone ‌consumers, already scarred by the Ukraine war, have changed their attitudes more quicklyin response to the Iran conflict, meaning the economic hit could be deeper and faster. "Today's inflation ​data are further cementing the ​case for a rate hike," Rabobank analysts said in a note, as they also flagged a ‌pick-up in consumers' medium-term inflation expectations.

"However, we still believe that the current backdrop is less conducive to broader and protracted inflationary pressures than 2021-2022." Separate data, however, showed France's economy shrank slightly in the first quarter. A preliminary reading had shown no change in the euro zone's second-largest economy. (Reporting by Lucy Raitano; Editing by Gus Trompiz, Joe Bavier and Paul Simao)