Most Gulf markets ended lower on Monday, led by sharp losses in Dubai, as the U.S.-Israeli war on Iran continued and oil prices jumped more than 11% on supply cuts and fears of prolonged Strait of Hormuz shipping disruptions.
U.S. President Donald Trump said on Saturday he was not interested in negotiations with Iran and suggested the war would end only when Iran no longer had a functioning military or leadership in power.
Further dousing hopes for peace, Iran on Monday named Mojtaba Khamenei as supreme leader to succeed his father Ali Khamenei, signalling that hardliners continue to dominate power.
Energy markets are particularly nervous because the crisis is unfolding around the Strait of Hormuz, through which roughly one-fifth of the world's oil supply normally passes.
Dubai's main share index (.DFMGI), opens new tab trimmed early losses to close 2.8% lower, with blue-chip developer Emaar Properties (EMAR.DU), opens new tab falling 4.7% and toll operator Salik (SALIK.DU), opens new tab declining 4.9%.
The index, which resumed trading on Wednesday after a two-day suspension, has fallen more than 11% over four sessions, leaving it down about 5% for the year so far.
Budget airline Air Arabia (AIRA.DU), opens new tab slumped 5%.
In Abu Dhabi, the index (.FTFADGI), opens new tab eased 0.4%, its sixth session of falls, hit by a 4.9% slide in Abu Dhabi Commercial Bank (ADCB.AD), opens new tab.
The Dubai and Abu Dhabi exchanges last week said they would suspend trading in shares falling 5% or more.
The cost of insuring against default on sovereign debt issued by several countries in the region rose sharply again on Monday.
Bahrain saw its five-year credit default swaps soar by 23 basis points from Friday's close to 281 bps, the highest in more than three years; Egypt's jumped 12 bps, and CDS for Saudi Arabia, Qatar, Abu Dhabi and Dubai all gained 4 bps, data from S&P Global Market Intelligence showed.
Saudi Arabia's benchmark index (.TASI), opens new tab fell 1.6%, snapping a five-day winning streak, with Al Rajhi Bank (1120.SE), opens new tab losing 3.9% and the country's biggest lender by assets Saudi National Bank (1180.SE), opens new tab decreasing 4.5%.
Budget airline flynas (4264.SE), opens new tab fell 4.4%, while Saudi Aramco rose 0.7% ahead of its annual earnings report due on Tuesday.
Investors are likely to rotate into sectors less exposed to regional tensions, according to Kamco Invest's Junaid Ansari. He said Saudi Arabia remained relatively attractive, with the TASI and Oman's MSM 30 the only markets still in positive territory since the crisis began, helped by Saudi Arabia's lower direct exposure and gains in Aramco.
According to George Pavel, general manager at Naga.com Middle East, Saudi efforts to reroute crude exports via Yanbu eased concerns over Hormuz disruption. The market could see further upside if oil stays elevated and domestic sentiment remains resilient.
The Qatari index (.QSI), opens new tab lost 2.6%, with almost all constituents in negative territory, including the Gulf's biggest lender by assets, Qatar National Bank (QNBK.QA), opens new tab, which fell 2.7%.
Elsewhere, Bahrain's bourse (.BAX), opens new tab declined 1.4%, while Kuwait's (.BKP), opens new tab lost 0.5%, and Oman's (.MSX30), opens new tab advanced 3.1%.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab dropped 0.8%, extending losses from the previous session.
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