Stock markets in the Middle East fell sharply on Sunday, mirroring the previous session’s slide in oil prices and global stocks caused by worries that a higher-than-expected U.S. inflation in May will lead to a long-term policy tightening and result in a sharp economic slowdown.

The investor woes were exacerbated as China reimposed lockdown measures, stoking worries about demand for oil, which significantly shapes the direction of markets in the region.

Saudi Arabia's benchmark index tumbled 2.2%, dragged down by a sharp decline in financial and energy stocks.

Oil giant Saudi Aramco dropped 3%, while Al Rajhi Bank fell 1.2%.

However, Saudi Telecom Company surged 6.57% after its board proposed increasing its share capital by 30 billion riyals ($8 billion) with the issue of 1.5 bonus shares for each share owned.

The company board also recommended changing its dividend policy - to commit the firm to 0.40 riyal ($0.11) per share per quarter rather than 1 riyal ($0.27) - in response to the proposed share capital increase.

In Qatar, the benchmark retreated 1.4%, as Qatar Islamic Bank dropped 2.7% and Industries Qatar lost 1.8%.

Outside the Gulf, Egypt's blue-chip index declined 1.4%, with Commercial International Bank Egypt falling 2.2% and Eastern Company sliding 4.1%. Egypt's petroleum ministry said Sunday that it planned to set up new area for crude oil storage in El-Tebbin, south of Cairo.

SAUDI ARABIA dropped 2.2% to 12,322 points

QATAR lost 1.4% to 12,918 points

EGYPT fell 1.4% to 10,098 points

BAHRAIN down 0.7% to 1,870 points

OMAN edged down 0.2% 4,126 points

KUWAIT dipped 2.1% to 8,260 points

($1 = 3.7513 riyals)

(Reporting by Mohd Edrees in Bengaluru)