What is the right course of action here?

You selected the correct answer. In this situation, you should not overtake the cyclists for now. German traffic law requires that, when overtaking cyclists in urban areas, you must keep a minimum lateral distance of 1.5 meters. If it is not possible to safely maintain this distance—due to factors like road width, oncoming traffic, or other obstacles such as a tram passing nearby—you must wait until the situation is safe before overtaking. Additionally, you are not allowed to use your horn simply to make cyclists move aside or ride in single file. Only when all safety requirements are met can you carefully overtake. Being patient and giving cyclists enough space helps prevent dangerous situations and ensures everyone's safety on the road.