Indian shares look set to extend recent losses on Friday as positive U.S. economic data and hawkish comments from more Fed officials poured cold water on rate-cut hopes.
Heightened geopolitical tensions may also weigh on markets after Israeli Prime Minister Benjamin Netanyahu said the country will make its "own decisions" on responding to Iran's unprecedented airstrikes and Iran's president warned that the even the "tiniest invasion" by Israel would result in a 'massive response'.
Elsewhere, Hezbollah claimed responsibility for launching missiles and drones at a military facility in northern Israel and said it was a response to Israel killing a number of its fighters.
Benchmark indexes Sensex and Nifty fell around 0.6 percent and 0.7 percent respectively on Thursday to extend losses for a fourth day running while the rupee closed at a record closing low of 83.5375 against the dollar.
Asian markets were deep in the red this morning, with benchmark indexes in Australia, South Korea, Hong Kong and Japan falling 1-3 percent.
The dollar traded in a narrow range while Treasuries were little changed after declining across the yield curve Thursday.
Gold traded up more than 1 percent above $2400 per ounce while oil prices spiked around 4 percent after reports that Israeli missiles had hit a site near the Iranian city of Isfahan.
U.S. stocks ended mixed overnight as two-year Treasury yields climbed toward the 5 percent mark on hawkish comments from Fed officials and data showing unexpectedly faster growth in Philadelphia-area manufacturing activity in April and a resilient labor market.
The S&P 500 slipped 0.2 percent and the tech-heavy Nasdaq Composite shed half a percent to extend losses for a fifth day running and reach their lowest closing levels in almost two months, while the Dow finished marginally higher.
European stocks rose on Thursday on expectations the European Central Bank (ECB) will start cutting interest rates soon rather than taking cues from the Federal Reserve.
The pan European STOXX 600 edged up 0.2 percent. The German DAX and the U.K.'s FTSE 100 both rose around 0.4 percent while France's CAC 40 added half a percent.
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