Washington's latest sanctions move - over what Moscow called far-fetched assertions it had deployed a nerve agent in Britain against a former Russian agent and his daughter - will cover national-security controlled goods, hitting Russian exports and even Aeroflot flights to Moscow.
The rouble fell around 1 percent to its lowest since August 2016, having already shed 3.3 percent - its biggest daily loss since April - on Wednesday. The Russian currency also hit its lowest since May against the euro.
Moscow's rouble share index fell 0.7 percent, and dollar-denominated equities tumbled 2.2 percent to April lows, with Aeroflot losing 7 percent.
Russian dollar bonds fell across the curve, with some issues down around 1.7 cents , while five-year credit default swaps rose to 154 bps, the highest since mid-June.
Broader Russian markets had already been falling amid heightened concern about another separate round of sanctions, including those owning Russian sovereign debt, being tabled by the US Senate over alleged US election meddling by Moscow.
"The probability that the bill will be passed and the new sovereign debt will be sanctioned is much higher than it was during similar discussions in early 2018," Vladimir Miklashevsky, senior economist at Danske Bank, said in a note.
If this legislation became law and Russia retaliated, Danske Bank estimated the rouble could hit 72 per dollar, as any major selloff of Russian local debt, local credit and stocks would amplify outflows from the currency, he said.
DOUBLE TROUBLE
Turkish assets also continued to sell off hard with the lira down a further 2.8 percent, having fallen almost 7 percent so far this week.
Investors are concerned about a deterioration in relations between Turkey and the United States over Ankara's detention of American pastor Andrew Brunson, with talks in Washington on Wednesday delivering no breakthroughs.
Brunson was jailed for allegedly supporting a group that Ankara blames for an attempted coup in 2016. He denies the charge.
President Tayyip Erdogan's tightening grip on monetary policy has also unnerved investors, with the central bank unable to tame double-digit inflation.
"I am personally at a bit of a loss why anybody would want to own Turkey here," said Paul McNamara, investment director at GAM London Limited.
"You have the classic combination of excessive domestic borrowing, and an awful lot of money going into construction which leverages the banking system to asset prices and the whole thing underpinned with foreign currency debt."
Turkey's sovereign dollar bonds continued to slide, with some issues down over 1 cent, while Turkey's average bond yield spread over US Treasuries rose to 462 bps, the highest since April 2009.
SUPPORT FROM CHINA
Weathering the twin sell offs, MSCI's benchmark emerging equities index rose 0.1 percent.
It was boosted by Chinese bourses bouncing amid talk of government support for domestic tech companies as Beijing's trade dispute with the US escalates.
Chinese blue chips jumped 2.5 percent, the Shanghai Composite 1.9 percent and Hong Kong 0.9 percent. The yuan firmed 0.2 percent.
Chinese factory price inflation cooled in July amid a slowdown in economic growth, although economists expect tariffs to add to wider price pressures in coming months.
The Kazakh tenge fell 1.2 percent to a 30-month low, tracking the rouble lower.