The bond selloff largely extended into Wednesday in Asia as surging oil prices re-ignited inflation concerns, fueling expectations of a rate hike by the Federal Reserve this month.

Renewed U.S.-Iran hostilities have driven oil prices sharply higher, with both Brent crude and West Texas Intermediate crude rising above $90 a barrel on Wednesday.

Markets now price in 70% probability of a September rate rise by the Fed after surging oil prices and hawkish comments from Fed Chairman Kevin Warsh last week, said James Reilly, economist at Capital Economics.

"Unlike past bond sell offs which had an obvious and often fixable cause, this one is unlikely to suddenly shift into reverse anytime soon," Reilly added.

The yield on Japan's 10-year government bond rose 2 basis points to 3.010%, after earlier touching 3.015%, the highest intraday level since September 1996. The yield on Australia's 10-year sovereign securities was up 4 basis points at 5.190% after earlier touching 5.2111%, the highest intraday level since July 2011, FactSet data showed.

The yield on New Zealand's 10-year government debt was last down 2 basis points at 4.790% after the Reserve Bank of New Zealand raised interest rates. Bond yields move inversely to prices.

"The repricing is occurring against an increasingly challenging inflation backdrop," MUFG analyst Lloyd Chan said in a note.

The just-concluded G-20 summit hasn't done much to calm investor jitters. Growing stress in global markets have raised fears among many investors that leaders aren't confronting challenges that could quickly spiral out of control.

Treasury Secretary Scott Bessent compared Iran to a dying snake still wriggling after decapitation, suggesting that the U.S. is willing to endure more economic pain in order to squeeze Tehran, even as the prolonged standoff has added to inflation and put bond markets on edge.