Brent crude climbed above $106 a barrel while the 10-year US Treasury yield touched 5.2%. On Monday, the impact of rising oil prices rippled through global bond markets, triggering further selling of government bonds and dampening investor appetite for equities.

During Asian trading hours, Brent crude rose more than 2% to around $106.60 a barrel, adding further pressure on global bond markets. On Monday, US Treasuries once again came under selling pressure, with the 10-year Treasury yield rising 0.04 percentage points to 5.2%. Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, said the combination of strong growth and high energy prices poses risks to future inflation expectations. Futures markets showed that traders had significantly raised their expectations for Federal Reserve rate hikes this year following last week's strong economic data. Bigos said: "The fact that economic growth remains resilient makes the future policy path for central banks more complicated."

In Japan, short-dated government bonds were among the hardest-hit assets. The yield on Japan's 2-year government bond briefly rose 0.05 percentage points to 1.97%, before falling back to around 1.96%. Bond yields move inversely to prices. Japan's 2-year government bond yield has not risen above 2% since 1995. Norbert Ling, head of fixed income portfolio management for Asia Pacific at Invesco, said: "The repricing in the US Treasury market is spilling over into other interest rate markets."

The rise came after the Bank of Japan released the minutes of its July meeting. The minutes showed that some members called for faster rate hikes to better curb inflation expectations. Bigos said the selling pressure in global bond markets partly stems from increased corporate bond issuance to finance artificial intelligence infrastructure construction, creating a "competition for capital."

On Monday, some Asian stock markets also faced selling pressure, with South Korea's Kospi index falling 2.5%. S&P 500 futures and Nasdaq 100 futures fell 0.3% and 0.6% respectively. Ling said he believes refined product prices are more important than the overall price of Brent crude, because refined product prices have a more direct impact on inflation. Refined product prices have risen partly because Europe and Asia have cut production capacity in recent years. He said: "What we are really focused on is refined products – that is the key area that most needs attention. Refined product prices are currently very high, but this is not a supply shock."

In early trading on Monday, precious metals were also sold off, with gold falling 2% to $4,200 per troy ounce. Investors said some central banks had previously increased their gold holdings, and during periods of high energy prices, they would sell gold reserves to protect their currencies.