Fenerbahce had been plotting a £30m bid for the 30-year-old England international, hoping to offer him a contract worth between £7.5m and £8.5m per year over three seasons, but Aston Villa made clear they would not accept a bid at that level, and the Turkish club never formally submitted an offer.
Watkins has scored 108 goals in 278 appearances since joining from Brentford in 2020, and was central to Villa's Europa League triumph and top-four Premier League finish last season, establishing himself as one of the division's most consistent forwards outside the traditional elite clubs.
Manchester United's interest is tied to the future of Joshua Zirkzee, who is attracting fresh interest from Italy, with Juventus keen on re-signing the striker who impressed in Serie A with Bologna before his move to Old Trafford.
Should Zirkzee depart for Italy, United are expected to make an official approach for Watkins, having already brought in his former Villa teammate Youri Tielemans this summer. Arsenal, meanwhile, are also weighing up a move, with the north London club expected to sell Gabriel Jesus this summer amid interest from Serie A side AC Milan and viewing Watkins as an ideal replacement in attack, reports The Sun.
Villa are not actively trying to force Watkins out, but his position could become less secure should the club complete a move for Chelsea striker Nicolas Jackson, leaving Unai Emery with Watkins, Jackson and Tammy Abraham all competing for a starting role.
Reports suggest Villa could be open to offers in the region of £40m, a fee that would look modest given Watkins' record, though his advancing years and the emergence of alternatives up front have combined to make his position at Villa Park less certain than at any point since his arrival five years ago.
Both Arsenal and United are expected to continue monitoring the situation closely as the transfer window enters its final weeks, with neither club having made a formal approach to Villa at this stage.