Global bond yields traded at multiyear highs in early European trade amid growing investor conviction that the U.S. Federal Reserve will raise interest rates at its next policy meeting.

A fresh bout of tit-for-tat attacks between the U.S. and Iran reinforced investors' inflation concerns, adding to rate-hike expectations that had been bolstered by a hawkish tilt by Fed Chairman Kevin Warsh during his Jackson Hole speech last Friday. Markets are now pricing a 67.5% probability of a 25 basis-point rate hike in September, according to LSEG.

Sovereign bonds sold off across the globe. Yields on 10-year Japanese government bonds touched levels not seen since 1996, while yields on 30-year U.K. gilts jumped to their highest level since 1998. In the U.S., 10-year yields rose 3.3 basis points to 4.789%, their highest level since January 2025.

Central banks in Japan and the eurozone are also expected to raise interest rates in the coming weeks.

The dollar rose on the prospect of higher rates, while Bitcoin moved in the opposite direction to trade at around $78,540. Gold slipped below $4,500 a troy ounce as higher rate expectations hurt the attractiveness of the non-yielding asset.

Brent crude most-traded futures rose by more than 1.5%, hovering close to $92 a barrel following renewed escalations between the U.S. and Iran.

U.S stock futures edged lower, with all the action focused on fixed-income markets. Chip stocks weakened in premarket trade as Nasdaq futures fell 0.6%. Futures for the Dow Jones Industrial Average and the S&P 500 both slipped by around 0.3% in early European trade. Asian and European blue-chip equity indexes largely slipped.

In Hong Kong, shares in fast-fashion retailer Shein dropped as much as 10% in its long-awaited trading debut.

A meeting of global finance ministers is taking place over the next two days at the G20 summit in Asheville, North Carolina. Investors will watch for market-moving speeches from the event, as well as the developing narrative around sticky inflation and higher borrowing costs. In the U.S., Palo Alto Networks and Dell will report earnings.