Mumbai, Sept. 29 -- Indian stocks fell to their lowest level in almost six months on Monday as hopes of a US-Iran breakthrough faded, pushing crude oil further above $100 a barrel and deepening worries over higher interest rates. The benchmark Nifty 50 tumbled 1.6% to close at 22,780.25, its lowest level since 2 April, while the Sensex declined 1.5%. Global markets turned risk-off, with stocks in Japan, South Korea and China sliding and US Dow futures facing pressure. US President Donald Trump said he had rejected an Iranian proposal to reopen the Strait of Hormuz and end the fighting, while Iran said diplomacy remained the only way out of the conflict with the US and Israel, according to reports. The setback sent oil prices higher as fears of a prolonged disruption in the strategically crucial strait resurfaced. Brent crude futures traded around $107 a barrel on Monday after touching a high of $108.83. The surge in oil prices has a major bearing on the Indian economy, as the country imports 90% of its oil requirement. A $1-per-barrel increase in oil prices for a year may add around Rs.18,000 crore to the country's annual import bill. Higher prices of oil and other commodities, including liquefied natural gas (LNG) and fertilizers, threaten to push up inflation and weigh on economic growth and corporate margins. Crude staying above the $100 mark is weighing on sentiment towards Indian equities, said Gaurav Dua, chief investment officer at Standard Chartered Securities India. "The rising expectations of a rate hike and a possible hawkish commentary in the RBI's (Reserve Bank of India's) forthcoming monetary policy review is an added overhang on the markets," he said. Monday's decline took the Nifty's fall this year to about 13%, making it one of the worst-performing markets in Asia. The Nifty PSU Bank index fell 3.2%, while the realty and oil & gas indexes fell about 2%, among the worst-hit sectors on Monday. The rupee declined 0.2% to 95.9850 per dollar. "India's macro indicators have remained resilient, but the outlook is weakening due to rising oil prices and inflation," according to a 21 September report by BNP Paribas Research. Brent has risen above $100 a barrel, US 10-year yields are near 5%, and rising global inflation is prompting central banks to hike rates. While FCNR flows have strengthened India's macro buffers, capital-flight risks have also risen with rate hikes in developed markets, the brokerage firm said. "The rupee has already depreciated by 1% and the RBI now has less room to keep interest rates unchanged," it said. Standard Chartered Securities' Dua said the RBI may raise interest rates, given the narrowing interest-rate differential between the US and India. The key trigger to watch now, he added, will be the RBI's commentary on the rate outlook and its assessment of economic growth. Technically, the benchmark CNX Nifty 50 is close to a strong support zone, and Dua expects a reprieve in the coming week after the Nifty's seven consecutive weeks of decline. (Srushti Vaidya contributed to this story)...