Brent crude approached $108 per barrel on Monday, dealing a blow to global bonds and stock markets.

The market had initially hoped that the US and Iran would soon reach an agreement to reopen the Strait of Hormuz, but that hope has now faded.

During early London trading hours, Brent crude rose 2.3% to approximately $106.65 per barrel. This followed US President Trump's rejection over the weekend of Iran's proposal to reopen the strait.

US Treasuries came under renewed selling pressure, with prices falling. The 10-year Treasury yield rose 0.02 percentage points to 5.2%, while the rate-sensitive 2-year Treasury yield climbed 0.04 percentage points to 4.91%.

S&P 500 and Nasdaq 100 stock index futures fell 0.4% and 0.9% respectively.

Jim Reid, Global Head of Macro Research at Deutsche Bank, said: "Although US-Iran talks may restart this week, there were no signs of a breakthrough over the weekend, and this morning bond yields and oil prices are moving higher again." He described the current conflict as a "stalemate."

In early London trading, UK gilts also weakened, with the 10-year gilt yield rising 0.04 percentage points to 5.4%. The German 10-year government bond yield held steady at 3.62%, keeping German borrowing costs at their highest level since 2011.

Geoffrey Yu, Senior Strategist at BNY Mellon in London, said: "The market is simply extending recent trends, and the underlying factor of tight energy supply will continue to persist."

Ekaterina Bigos, Senior Market Strategist at BNP Paribas Asset Management, stated that strong economic growth combined with high oil prices will pose a risk to future inflation expectations.

Futures markets show that following last week's strong economic data, trading institutions have significantly raised their expectations for Federal Reserve rate hikes this year. Bigos said: "Economic growth has shown resilience, which complicates the policy path for central banks."

Japanese short-term government bonds became one of the most severely affected asset classes. The 2-year Japanese government bond yield rose as much as 0.05 percentage points to 1.98%, before retreating to around 1.97%. The 2-year Japanese government bond yield has not exceeded 2% since 1995.

This yield increase stemmed from the release of the Bank of Japan's July policy meeting minutes. The minutes showed that some committee members called for accelerating the pace of rate hikes to better manage inflation expectations.

Sovereign bonds in other Asia-Pacific countries also came under pressure, with 10-year government bond yields in Australia and New Zealand rising 0.05 and 0.02 percentage points respectively. South Korean markets reopened after the holiday, trading for the first time since last Wednesday, and the 10-year South Korean government bond yield rose 0.15 percentage points to 4.54%.

Norbert Lin, Head of Asia-Pacific Fixed Income Portfolio at Invesco, said: "The repricing in the US Treasury market is spilling over into other interest rate markets."

Bigos pointed out that the sell-off in global bond markets is partly due to companies increasing bond issuance to raise funds for AI industry construction, creating a "battle for capital."