Reports suggesting a potential arrangement between the US and Iran regarding the Strait of Hormuz, along with news that negotiations between Oman and Iran have reached an advanced stage, have driven oil prices lower. This development helped German government bonds recover from earlier losses on Tuesday.

The yield on Germany's 10-year benchmark bond, which had initially risen by 3 basis points to 3.20%, subsequently fell back to 3.18%. The global benchmark Brent crude oil retreated from highs near $90 per barrel to around $87.

Meanwhile, the yield on the UK's 10-year gilt had earlier climbed 6 basis points to 5.05% before settling back to 4.99%. Traders have scaled back expectations for interest rate hikes by the European Central Bank and the Bank of England. Currently, the market anticipates a cumulative 40 basis points of rate increases from the European Central Bank by year-end, and 28 basis points from the Bank of England.