Japanese shares dropped as rising crude prices rattled bond markets globally, fueling investor concerns that rising inflation will force central banks back into monetary tightening.

The Nikkei 225 slipped 1.5% or 1,019.9 points to open at 65,195.43.

Crude extended its winning streak to a third day, climbing to over $90, amid escalating U.S.-Iran tensions that threaten shipments through the Strait of Hormuz.

The oil rally pushed worldwide bond yields to their highest levels since 2008, as investors increasingly bet on Federal Reserve rate hikes to combat resurgent inflation.

Traders now look to Friday's U.S. payroll data for further signals on monetary policy, with price growth still exceeding the Fed's 2% goal.