The Indian rupee slipped to its weakest in more than a week on Monday as oil prices marched higher, dragging down regional stocks and currencies as investors fretted over the impact of high energy prices and geopolitical uncertainty.

Dollar sales from state-run banks, most likely on behalf of the Reserve Bank of India, curbed losses with the rupee settling down 0.2% at 95.9825 per dollar.

Brent crude rose nearly 4% to $108.2 per barrel. US President Donald Trump rejected Iran's peace plan, but told Axios in a phone interview that he expected US negotiators to engage in more talks this week.

Investors responded by pushing bond yields higher and stocks lower. MSCI's gauge of Asian stocks fell nearly 1% while stocks in Mumbai declined nearly 1.5% to their lowest level since April.

India imports nearly 90% of its crude requirements, making the rupee one of the world's most vulnerable currencies to the Middle East oil shock.

"Several investors just have an outright bearish view on all EM Asia high-yield currencies, including the PHP, IDR and INR, given their vulnerability to higher energy costs," analysts at Goldman Sachs said in a note, summarising feedback from investors located in the UK.

Goldman, meanwhile, says the RBI has the ability to keep the rupee within the 94-97 range, or at least manage the pace of its depreciation.

A glut of capital inflows sparked by policy measures has given the Indian central bank ammunition to go against the tide but investors are keeping an eye on the persistence of that defence. Between June 8 and September 18, these measures drew in $143.6 billion.

"For now, 96 is the floor under INR and it doesn't seem like the RBI will allow a move past that," a trader at a foreign bank said.