A deep selloff pushed Indian shares to their worst session in two months on Thursday, as anxious investors worried about ripple effects on the domestic economy from the widening Middle East conflict.

The Nifty 50 index closed 2.12% lower at 25,250.1 points, while the S&P BSE Sensex shed 2.1% to 82,497.1. The benchmarks posted their worst session since early August.

Asian peers outside Japan dipped 1.25% as Middle East tensions curbed risk sentiment after Iran fired ballistic missiles at Israel earlier this week, stoking worries that crude supplies from the world’s biggest producing region may be disrupted.

“The Middle East tensions have made investors very nervous, with the rhetoric from both Israel and Iran spurring worries of further escalation, which is triggering risk aversion and profit booking,” said Saurabh Jain, assistant vice president of research of retail equities at SMC Global Securities.

A jump in oil prices on the day triggered declines in domestic paintmakers, tyre-makers and oil refiners, which count crude or crude-linked products as their raw materials.

Indian shares end flat as IT offsets energy losses

Foreign outflows from India to China could also intensify in the near term due to China’s recent announcement of stimulus measures to boost its economy, adding to the pressure on domestic equities, analysts said.

Jefferies has increased its weightage of China in its Asia Pacific ex-Japan portfolio, trimming its weightage of India. HSBC has also upgraded China stocks to “overweight” from “neutral” after the stimulus measures.

On the day, only two of the Nifty 50 constituents settled higher while all the 13 major sectoral indexes declined.

Realty and auto fell 4.4% and 2.9%, while high-weightage financials dropped 2.4%.

Among individual stocks, consumer goods firm Dabur lost 6.3% after it forecast its first quarterly revenue decline since 2020.

The broader, more domestically-focused small- and mid-caps lost about 2% each.

About 76% of the total 2,912 shares trading on NSE declined, as the market breadth turned in favour of the bears.