London: Russia’s failed defence of the rouble and a plummeting oil price added to a global emerging markets rout on Tuesday that sent bourses lower in Asia, the Middle East and Europe.

The MSCI emerging stocks index traded 1.6 per cent lower, on track for an eighth day in the red while the Asia excluding Japan benchmark dropped 0.7 per cent.

In Russia, the rouble fell as much as 20 per cent after an early rally in response to an aggressive interest rate hike went sharply into reverse.

Russian stocks on the dollar-denominated RTS index/slumped 12 per cent while sovereign and corporate bonds also retreated.

Middle East stock markets fell especially hard as Brent Crude dropped through $59 per barrel for the first time since 2009. Saudi and Dubai stock markets suffered falls of more than 7 per cent.

Emerging markets are already reeling from a strengthening dollar as the United States recovers, sucking investment into US assets in pursuit of better returns. This has led to heavy selling of currencies seen as particularly vulnerable, such as Turkey, Thailand and Indonesia, and policymakers have started to consider taking action.

While a falling oil price could help countries dependent on foreign funding to plug balance-of-payments gaps, analysts are now warning the rout on energy markets could prompt contagion beyond energy exporters such as Russia.

“The market needs to see oil prices stabilising. Then we can reassess the situation. It’s risk-off for the time being,” said Commerzbank analyst Simon Quijano-Evans.

Market insiders said expectations are mounting of further action by Russian authorities to head off a full-blown financial crisis.

“We think capital controls as a policy measure cannot be off the table now,” said Luis Costa, a senior analyst at Citi.

Benoit Anne, head of emerging markets strategy at Societe Generale in London, said Moscow “still has some hard work to do” and the flight from Russian assets appears to be spreading beyond professional speculators and taking hold among smaller private investors.

“The big change is it’s probably more of a retail flow story now than a fast money bearish story,” he said, though capital controls are only likely as a “last resort”.

Russian dollar bond spreads over US. Treasuries — the premium investors demand over safe-haven debt — widened 29 basis points to 695 basis points after crossing the psychologically critical 600 basis-point level on Monday for the first time since 2009.

The cost of insuring exposure to Russian debt jumped, with 5-year credit default swaps rising 109 basis points to 656 basis points, a new 5-1/2 year high, according to financial data provider Markit.

Events in Russia also affected the rest of eastern Europe, driving bourses down to multi-month lows.

Budapest’s main index led the decline, falling 4.8 per cent to its lowest levels since March, Prague’s main equities index hit an 8-week low, falling 2 per cent, while Warsaw’s top 20 stocks were at their lowest since August, shedding 2.3 per cent.

Earlier, the Indonesian rupiah had posted a small gain of 0.2 per cent against the dollar but has slumped to levels last seen in the 1998 Asian financial crisis.

The Indonesian government said on Tuesday it would buy government bonds back from the secondary market if needed as the rupiah slumps and government bond yields soar on the flight of capital from the country.

The Turkish lira was trading 0.2 per cent lower against the dollar, having fallen to a record low on Monday.

Earlier, Turkish Economy Minister Nihat Zeybekci said he did not believe the lira required “strong intervention”.