Saudi Arabia's bourse declined on Monday as falling crude prices and worries over the global economy spurred selling, ending an early-week equity rally in the world's top oil exporter.
Regional markets were mixed, with Egypt gaining on optimism that company results would begin to improve after a popular uprising damaged the economy.
Saudi petrochemicals led a drop by the 15 top stocks, with Saudi Basic Industries Corp (SABIC) and Yanbu National Petrochemical Co (Yansab) down 1.3 per cent each.
U.S. crude futures CLc1 were down 2.6 per cent at US$84.22 a barrel by mid-afternoon.
"The major driver for Saudi is the global macro picture and where oil prices are going," said Hesham Tuffaha, Bakheet Investment Group head asset management.
"If we get a week of calm on global markets, Saudi investors will shift their focus onto third-quarter results."
He forecast profits in petrochemicals and banking would fall quarter-on-quarter, with petrochemical margins tied to oil prices and banks failing to increase lending activity, with local consumption helping retail, construction and food.
"These sectors will most likely achieve double-digit growth compared to Q2," added Tuffaha.
World stocks fell on Monday as worries about Greek and Italian fiscal deficits and fears of a renewed U.S. recession prompted investors to sell riskier assets.
Dubai and Abu Dhabi extended drops, as Dubai Islamic Bank fell 1 percent and Deyaar lost 2.6 percent.
"Our markets are not suffering from high valuations or a bad economy, but low liquidity and that cannot change without intervention from government or semi-government institutions," said Mohammed Yasin, CAPM Investment chief investment officer.
Dubai turnover, at a six-year low in 2010, is still lacklustre and the index is down 9.3 per cent in 2011.
The market's woes come despite an upbeat outlook for the UAE economy, which is forecast to grow 3.7 per cent in 2011, according to a Reuters poll in June. .
Real estate dominates Dubai's stock market and is mired in a deep correction as property prices plunged by more than half from 2008 peaks.
Kuwait's index rose for a seventh session in eight since late August's seven-year low, but a sustained recovery is unlikely, with traders dismayed the oil exporter's $110 billion development plan revealed in 2010 has come to little.
"People had bet on the plan providing the market with some momentum, but it now seems it is on hold and only ever seemed like a vague spending plan, rather than a plan to build the nation," said a Kuwait trader who asked not to be identified.