Shares in Qatari banks fell in early trade on Sunday after the central bank of the United Arab Emirates ordered UAE banks to be wary of any accounts they hold with six Doha-based banks.
In Dubai, the largest listed property developer, Emaar Properties, rose 0.9 percent as investors continued to react positively to its plan to distribute funds from a listing of its local real estate developer to shareholders.
The UAE, as part of its response to the diplomatic rift in the region, told local banks to apply "enhanced due diligence" to the Qatari institutions and instructed banks to stop dealing with 59 individuals and 12 entities with alleged links to Qatar.
Five of the six Doha-based banks named are listed on the stock market: Qatar National Bank, Qatar Islamic Bank, Qatar International Islamic Bank, Masraf Al Rayan and Doha Bank. Shares in all of them fell on Sunday with the largest, QNB, down 1.0 percent.
Qatari banks have about 60 billion riyals ($16.5 billion) in funding in the form of customer and interbank deposits from other Gulf states, SICO Bahrain estimated, and the banks account for just over half the Qatari stock market's value.
Although the UAE stopped short of a blanket ban on dealings with Qatar, its move could have much the same effect if UAE banks - and perhaps those in other countries - reduce their exposure to Qatari institutions for fear of getting caught in the diplomatic crisis.
Shares in Barwa Real Estate were down 4.9 percent and the Qatari stock index fell 1.3 percent on Sunday morning. Last week, the Doha index shed 7.1 percent.
In Abu Dhabi, the banking sector helped carry the index 0.5 percent higher. First Abu Dhabi Bank- the second largest bank in the region by assets after QNB - was 0.9 percent higher.
The Dubai index was almost flat, however, as nine shares rose along with Emaar but 15 declined.
The Riyadh index was flat, weighed down by the petrochemical sector as Brent oil stayed near a one- month low. Propylene maker Yanbu National Petrochemicals was down 0.4 percent.