Qatar's main index led a drop in most stock markets in the Gulf, while the Saudi index fell to its lowest since May last year on worries over the fallout of aggressive U.S. interest rate hike following the latest economic data.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 1.4%, the biggest fall since Nov. 21, as strong services sector data suggested the U.S. central bank might hike interest rates for longer.
Most Gulf Cooperation Council countries have their currencies pegged to the dollar and generally follow the Fed's policy moves, exposing the region to a direct impact from any monetary tightening by the Fed.
Saudi Arabia's benchmark index dropped 1.3%, trading at its lowest since May 2021, dragged down by a 1% fall in Al Rajhi Bank and a 0.7% decrease in Retal Urban Development Co.
Elsewhere, Saudi Enaya Cooperative Insurance tumbled 4%, after it signed a non-binding agreement to evaluate a potential merger with United Cooperative Assurance.
Shares of United Cooperative Assurance were down 0.9%.
The Qatari index slid 1.6%, extending losses from the previous session, hit by a 3.6% slide in the Gulf's biggest lender Qatar National Bank.
In Abu Dhabi, the index eased 0.2%. However, the index found some support from rising oil prices.
Oil - a key catalyst for the Gulf's financial market - rebounded after plunging more than 3% in the previous session, as the implementation of sanctions on Russian sea-borne crude oil eased concerns about oversupply, while easing China's COVID curbs bolstered the demand outlook.
Dubai's main share index added 0.2%, helped by a 0.7% gain in blue-chip developer Emaar Properties.
Separately, the United Arab Emirates and Ukraine agreed on Monday to begin talks on a bilateral trade deal, expected to conclude by the middle of next year, the UAE's economy ministry said.
(Reporting by Ateeq Shariff in Bengaluru; Editing by Arun Koyyur)