(Corrects typographical error in headline)

(Reuters) -India's equity benchmarks were muted on Thursday and the broader markets declined, as investors stayed cautious amid escalating Middle East tensions and hawkish U.S. monetary policy cues.

The Nifty 50 fell 0.08% at 24,793.25 and the BSE Sensex lost 0.1% to 81,361.87.

Twelve of the 13 major sectors logged losses.

The auto index defied broader weakness to close 0.5% higher, with Mahindra & Mahindra extending gains after it received antitrust approval for its proposed acquisition of SML Isuzu.

Asian and European markets declined on the day.

Gold and the dollar gained as safe-haven demand rose after U.S. President Donald Trump said America "may or may not" join Israel's strikes on Iran, escalating fears of U.S. entry into the Israel-Iran air war. [MKTS/GLOB] [O/R]

"The conflict threatens to choke supply near the Strait of Hormuz, a key trade route, and spur a rise in crude prices, which is a fast-track to inflation and market jitters," said Ross Maxwell, global strategy lead at VT Markets.

The broader small-caps and mid-caps closed 2% and 1.6% lower, respectively, with analysts attributing their underperformance to their weaker buffer against rising crude prices relative to large-caps.

Overnight, the Fed left interest rates steady but projected two reductions by the year-end and signalled a slower path for rate cuts.

"The status quo on rates, even amidst the wave of criticism from Trump and Fed Chair Jerome Powell's commentary, indicated high uncertainty over the impact of tariffs," said analysts led by Hitesh Suvarna of JM Financial.

Among individual stocks, Biocon rose 2% after HSBC expected a successful qualified institutional placement to ease debt and help sharpen its focus on the biosimilars segment.

Tata Consumer gained 2.2% after the company said it has a "sizable amount of gunpowder" for acquisitions at the right price.

($1 = 86.5400 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Janane Venkatraman, Jacob-Phillips and Mrigank Dhaniwala)

By Bharath Rajeswaran