Qatar's shares led a decline in most Gulf markets on Wednesday after Saudi Arabia, the United Arab Emirates and Bahrain said they would withdraw envoys from Doha over what they called interference in their internal affairs.
The move, conveyed in a joint statement by the three countries, is unprecedented in the three-decade history of the Gulf Cooperation Council, a pro-Western alliance of Saudi Arabia, Bahrain, Kuwait, Qatar, the UAE and Oman.
Most Gulf markets reversed early-session gains driven by relief over Ukraine before Gulf tension hit investors sentiment.
"It's a diplomatic agreement at this stage to show a dissatisfaction with polices - I don't see a threat to commercial or economic ties between the GCC at this moment," said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital.
Doha's measure dropped 2.1 percent in its biggest one-day loss in more than six months. Non-Qatari investors were net sellers as well as Qatari individual investors.
"It's retail-driven panic selling, it's too early to say if this would have an impact on fund allocations for institutional investors, because we don't know how the situation will evolve," said Ali Adou, portfolio manager at The National Investor.
Telecommunications firm Ooredoo was hit the worst; the stock nosedived 7.0 percent after the company posted a 36 percent drop in fourth-quarter net profit and missed two analysts' estimates.