Most Gulf stock markets retreated in early trade on Monday after Iran and the U.S. exchanged strikes, while Israel ordered troops to push further into Lebanon in its battle with Tehran-backed Hezbollah.

The U.S. said it struck Iranian military sites over the weekend, and Iran's Revolutionary Guards said on Monday they had targeted a U.S. base in response, marking the latest exchange amid negotiations to end the three-month-old war.

The fighting, which followed Israel-Lebanon peace talks hosted by Washington on Friday, dampened hopes that the U.S. and Iran could soon announce an extension of their ceasefire.

Saudi Arabia's benchmark index .TASI eased 0.1%, hit by a 0.5% fall in Al Rajhi Bank 1120.SE.

The Qatari index .QSI dropped more than 1%, as most of its constituents were in negative territory, including Qatar Islamic Bank QISB.QA, which declined 2.2%.

In Abu Dhabi, the index .FTFADGI was down 0.1%, with the country's biggest lender First Abu Dhabi Bank FAB.AD falling 2%, as the lender has exposure to the insolvencies of properties linked to mortgage lender Market Financial Solutions, according to the Financial Times.

The lender did not immediately respond to a Reuters request for comment.

Dubai's main share index .DFMGI bucked the trend to trade 1.1% higher, led by a 3.7% rise in toll operator Salik SALIK.DU.

Trump said on Friday he would soon decide on a proposed deal to extend the ceasefire with Iran, though the two countries still appeared to differ on significant issues that have been central to the conflict.

Oil prices rose more than 2% in early trading on Monday, stoking concerns around inflation and interest rate hikes. O/R

(Reporting by Ateeq Shariff in Bengaluru)