Global bond yields traded at multiyear highs, while the Nasdaq led a slump in U.S. stock futures in afternoon 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 pushed oil prices higher and reinforced inflation concerns. Investors' higher-for-longer inflation outlook added to rate-hike expectations that had been bolstered by Fed Chairman Kevin Warsh's hawkish tilt during his Jackson Hole speech last Friday. Markets are now pricing a 65.4% probability of a 25 basis-point rate hike in September, according to LSEG.

"The onus is now on Warsh to deliver a September hike," Bank of America economists Anitya Bhave and Shruti Mishra wrote in a client note. "Otherwise, he risks undermining some of the credibility he gained on Friday."

Sovereign bonds sold off across the globe. Yields on 10-year Japanese government bonds crossed the 3% mark, touching levels not seen since 1996. Analysts fear the country's next budget could herald a bumper wave of borrowing, compounding broader concerns about the scale of government deficits worldwide.

Yields on 30-year U.K. gilts jumped to their highest level since 1998, while 10-year gilts are trading at heights not seen since the financial crisis. In the U.S., 10-year yields rose 4.1 basis points to 4.797%, their highest level since January 2025.

Eurozone inflation data released Tuesday morning showed prices rose for a third-straight month in August, reinforcing expectations the European Central Bank will raise rates next week. The Bank of Japan is also expected to raise interest rates at its next meeting.

The dollar rose on the prospect of higher rates, while Bitcoin moved in the opposite direction to trade down 0.8% at $77,993.96. Gold pulled back from recent highs to trade 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 1.7% to top $92 a barrel as investors increasingly expect supply disruptions through the Strait of Hormuz to continue for the foreseeable future.

U.S. stock futures extended losses throughout the European session. Technology stocks fell, with weakness across chip stocks and hyperscalers. Nasdaq futures were down 1.2%, while futures for the Dow Jones Industrial Average and the S&P 500 each slipped by around 0.5%. Asian and European blue-chip equity indexes also fell back.

In Hong Kong, shares in fast-fashion retailer Shein dropped as much as 10% in its long-awaited trading debut, before stabilizing at the market close.

A meeting of global finance ministers is taking place 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 after the closing bell.