By Avinash P

June 11 (Reuters) - Emerging market stocks were lower on Thursday as renewed U.S.- Iran tensions pushed up oil prices and curbed risk appetite, while currencies remained mostly muted.

The United States and Iran traded air attacks for a second straight day, with President Donald Trump vowing further strikes if Tehran does not immediately agree to a peace deal.

The escalation in hostilities is the biggest test yet of the fragile truce that took effect in early April. The conflict has driven energy prices higher, exacerbated inflationary pressures and stifled growth expectations.

MSCI's global EM stocks index .MSCIEF dipped 0.4%. Taiwanese equities .TW11 inched 0.2% lower while South Korea's KOSPI .KS11 ended 0.4% higher, buoyed by a 2.6% rise in chipmaker SK Hynix 000660.KS.

Both indexes have seesawed this week as Middle East uncertainty and a halt in the AI rally weighed on otherwise exceptional yearly performances.

Currencies were largely flat to lower against the U.S. dollar =USD, which held firm as a rise in May U.S. consumer inflation to a three-year high reinforced expectations that the Federal Reserve would not lower rates.

The South Korean won KRW= depreciated 0.6%, taking the currency's yearly loss to more than 6%, placing it among the worst performers of 2026. MSCI's currency gauge .MIEM00000CUS slipped 0.1%.

Indonesia's stock exchange was set to snap a two-day win streak, while the rupiah firmed against the dollar.

"Portfolio outflows are weighing on the tech-sensitive Korean won. We have not touched on the idiosyncratic sell-off in the Indonesian rupiah recently, but Tuesday's emergency rate hike by Bank Indonesia has failed to quell many concerns over local policy decisions there," said ING analysts said in a note.

Bourses in India .NSEI, .BSESN edged higher while China's benchmark indexes .SSEC, .CSI300 traded lower.

Turkish shares .XU100 advanced 0.2%, ahead of the central bank's rate decision later in the day, while the currency slipped TRYTOM=D4.

Analysts polled by Reuters expect the central bank to hold its benchmark interest rate at 37%.

Currencies of Central European economies were largely flat against the Euro, but Hungary's forint EURHUF= strengthened 0.1%, taking its yearly gain to almost 7.5%.

Equities in Budapest .BUX and Warsaw .WIG gained 1% and 0.6%, respectively, while those in Bucharest .BETI were flat.

HIGHLIGHTS:

** South Korea expects favourable outcome after Lee's EU steel request

** Indonesia April retail sales drop 3.7% on year in steepest fall since May 2023

** Some lenders hike rates on FX deposits for non-resident Indians

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