Saudi Arabia's stock market led declines in much of the Gulf region on Wednesday, hitting its lowest since April last year as worries mounted about a global economic downturn.

Data released on Monday showed U.S. services industry activity unexpectedly picked up in November, prompting investor speculation that the Fed could keep raising interest rates for longer which could hurt economic growth. Traders expect a half-point hike from the Fed on Dec. 14.

Most Gulf Cooperation Council countries, including Saudi Arabia, the United Arab Emirates and Qatar, have their currencies pegged to the U.S. dollar and follow the Fed's policy moves closely, exposing the region to a direct impact from monetary tightening in the world's largest economy.

Saudi Arabia's bechmark index declined 2.5%, hitting its lowest since April 2021, dragged down by a 4.9% slide in Al Rajhi Bank and a 4.7% fall in Riyad Bank. The Saudi bourse could see more losses while concerns remain around the developments in oil markets, Daniel Takieddine, CEO MENA at BDSwiss, said.

"However, the market could find some support in solid local fundamentals."

Oil - a key catalyst for the Gulf's financial markets - edged higher after Brent crude earlier fell close to its lowest this year, as hopes of higher Chinese demand offset concern about recession and easing fears that a Western cap on Russian oil prices would curb supply.

In Abu Dhabi, the index lost 0.7%, with the country's biggest lender First Abu Dhabi Bank down 1.9%.

The United Arab Emirates' non-oil private sector grew in November at its slowest pace since January, as concerns over a global slowdown weighed on sales and confidence, a survey showed on Wednesday.

The Qatari index, which wiped out its year-to-date gains in the previous session, retreated a further 1.3%.

Outside the Gulf, Egypt's blue-chip index finished 2% higher, gaining for a seventh session.

  • SAUDI ARABIA down 2.5% to 10,185
  • ABU DHABI fell 0.7% to 10,336
  • DUBAI was flat at 3,339
  • QATAR dropped 1.3% to 11,463
  • EGYPT lost 1.1% to 11,337
  • BAHRAIN eased 0.1% to 1,857
  • OMAN rose 1.4% to 4,724
  • KUWAIT added 0.1% to 8,285

(Reporting by Ateeq Shariff in Bengaluru; Editing by Kirsten Donovan)