German 10-year bond yield dips, but still near multi-year high on inflation concerns 

* Investors monitor US-Iran tensions, Trump's China visit

* ECB rate hikes expected ​as oil ⁠prices fuel inflation fears

* Fed rate cut bets recede

LONDON, May 14 (Reuters) - Germany's 10-year government bond yield fell on Thursday but remained close to its recent multi-year peak as elevated energy prices solidified expectations for ​higher ‌inflation and European Central Bank rate hikes. After U.S. President Donald Trump and China's President Xi Jinping met, a White House official said the leaders ⁠had agreed that the Strait of Hormuz, a key route for global ⁠energy supplies, should be open, and that Iran ​should never obtain nuclear weapons. China is close to Iran and the main buyer of its oil.

Expectations for a lasting peace deal between the U.S. and Iran have faded this week, keeping the Strait of Hormuz effectively closed to maritime traffic. Trump is expected ​to ask Chinese ‌President Xi Jinping to help end the war, although just prior to his trip he had said he did not need assistance.

Many European investors were off for the Ascension Day holiday on Thursday.

Germany's 10-year yield, the benchmark for the euro zone, was last down 5 basis points at 3.04%, having risen more than 40 bps since the outbreak of the conflict. It ​remained close to the 3.133% level touched at the end of April, the highest since mid-2011.

ECB SET TO HIKE

The surge in ‌oil prices has reignited worries about stagflation - higher inflation and slower growth - and prompted investors to price in rate hikes from the ECB.

Money market traders now price in a nearly ‌90% chance of a rate hike at the June 11 meeting, with three hikes almost fully priced in by the end of the year. Prior to the conflict, investors were expecting the ECB to keep its deposit rate on hold throughout 2026.

"It seems ​that time is running out to prevent a pre-emptive hike in June," said Citigroup's European rates strategist Jamie Searle.

Germany's two-year bond yield, which is sensitive to ‌monetary policy expectations, was down 5 bps on Thursday at 2.66% but up almost 70 bps since the outbreak of the war in late February as investors repriced rate expectations. Market participants also expect the Federal Reserve to be less dovish this year ⁠as inflation accelerated ⁠by more than expected last month. U.S. producer prices posted their biggest increase in ‌four years in April, while consumer prices rose at their fastest annual pace in three years, data showed this week. The inflation increase has put paid ​to rate cuts from the ​Fed this year, and poses a problem for Kevin Warsh, Trump's pick to lead the central ‌bank when Jerome Powell's term ends on Friday. In Britain, Labour's Wes Streeting resigned as health minister on Thursday to call for a leadership contest to oust Keir Starmer.

Britain's 10-year government bond yield was down 7.5 bps at 5.0%. It hit 5.13% on Tuesday, its highest since 2008.