What is the right course of action?

Your answer is correct because you have the right of way in this situation. The yellow diamond sign indicates that you are on a priority road. This means you do not need to yield to the blue car or any other vehicles coming from the side streets. The blue car is on the minor road, and therefore must give way to you.

In German traffic rules, priority roads are marked with this yellow diamond sign, which means vehicles on this road have priority over vehicles entering from other roads. So you may proceed without stopping or yielding to the blue car or green car.

Remember, whenever you see the yellow diamond, you have priority until the sign changes or you come to another priority sign. This helps you understand when you must yield and when you can continue driving confidently.