Indian markets crashed on Thursday, with the Sensex plunging 1,045 points and the Nifty falling 371 points in a broad selloff. It was one of the worst single-day falls this year.

The selloff was driven by the Reserve Bank’s 25-basis-point rate hike to 5.5% and surging oil prices. Brent crude crossed $104 a barrel on fears of US strikes on Iran.

Banking and rate-sensitive stocks led the declines as investors repriced borrowing costs. Higher rates squeeze lenders’ margins and raise EMIs for borrowers.

Analysts say markets will stay volatile as traders watch oil prices and the RBI’s next moves. The central bank has signalled that rate cuts are off the table for now.

The rupee also came under pressure as oil importers bought dollars. Traders said the combination of costlier crude and higher rates is the worst possible mix for Indian equities.

Small investors bore the brunt, with midcap indices falling even harder.