U.S. stock futures fell sharply and a selloff in Treasurys intensified in early European trade, as market sentiment wilted at the start of a week that includes crucial releases of U.S. inflation and jobs data.

A fresh rally in oil prices Monday compounded inflation fears and strengthened expectations for further Federal Reserve tightening, sending Treasury yields to fresh multiyear highs. Ten-year yields climbed 4.9 basis points to 5.214%, 30-year yields gained 2.2 basis points to 5.518%. Two-year yields also rose to trade around 4.920%. Markets are pricing a more than 70% likelihood that the Fed opts for a quarter-point raise next month.

Brent crude oil contracts for November delivery rose 2.4% to $106.82 a barrel. Over the weekend, President Trump rejected an Iranian proposal to reopen the Strait of Hormuz. Mediators are pushing Tehran to compromise on nuclear proliferation, but Iran is showing little willingness to budge on the issue, The Wall Street Journal reported. Fears that diplomatic progress stalled also spurred natural gas prices higher, with the European benchmark gaining more than 2%.

"We believe that we are in a one factor world with oil driving rates and rates driving all asset classes," wrote Jefferies economist Mohit Kumar in a client note.

Sentiment in U.S. equity markets was sour. Technology stocks led declines in U.S. premarket, with Nasdaq futures dropping 0.9%. Futures for the S&P 500 and Dow Jones Industrial Average both fell by around 0.4%. Asian stocks started the week mostly lower, with chip stocks dragging on indexes in Japan and South Korea. However, the technology-light Stoxx 600 nudged 0.3% higher in Europe.

Increased expectations for central bank tightening weighed on non-yielding assets. Precious metals prices slipped sharply, with New York gold falling 1.9% to around $4,200 a troy ounce, while bitcoin fell below $83,000.

For the week ahead, U.S. PCE inflation data Wednesday and the U.S. jobs report Friday will be in focus. On Monday, European Central Bank President Christine Lagarde will speak, while investors will watch for the Dallas Fed's manufacturing activity survey for September.