Global Markets-Middle East tensions drive oil over $100, Wall Street drops

The 10-year U.S. Treasury yield, the benchmark for global borrowing costs, traded at 4.794%. It touched a near three-year high of 4.818% last week as traders ramped up expectations of a tighter monetary policy.

U.S. producer and consumer price reports, set to be released later this week, are seen as a real test for those bets, with policymakers looking for further evidence that inflation pressures are continuing to cool.

The latest Reuters survey of economists found about 70% expect the Federal Reserve to keep rates steady at its rate-setting meeting next week, but that certainty is below the 90% expectation of steady rates in August.

"Financial markets remain genuinely divided over whether the FOMC will raise rates at next week's September meeting, an unusual state of uncertainty this close to a decision date," said Matthew Ryan, Head of Market Strategy at global financial services firm Ebury.