Saudi Arabia's stock market rose sharply on Tuesday, leading gains in most major Gulf bourses amid a global rally after Washington temporarily eased trade restrictions imposed last week on China's Huawei. Qatar dropped on wide sell-off.

Saudi's index increased 1.7%, with Al Rajhi Bank adding 2.2% and Saudi Basic Industries 2010.SE up 3.3%.

"Middle East today is following the positive lead from Global markets. Local sentiment is also better as evidenced by the strong moves in small cap stocks," said Vrajesh Bhandari senior portfolio manager at Al Mal Capital.

"We expect Saudi Arabia to continue its upward trend until at least the MSCI effective date May 28," added Vrajesh. "Thereafter, investors need to be selective & follow a bottom up approach. Overall, we find better value in UAE & Egypt."

MSCI last week said it would include MSCI Saudi Arabia in its emerging-markets index, effective May 28, a move that could draw billions of dollars into the market. 

Saudi International Petrochemical closed 3.4% higher. The firm completed the merger of equals with Sahara Petrochemical, which delisted on May 20.

Qatar's index was down 2%, with 17 of its 20 stocks sliding.

Middle East's largest lender, Qatar National Bank, dropped 2.4%, while Mesaieed Petrochemical Holding plunged 10%, snapping a six-day winning streak triggered by the stock inclusion in MSCI's index.

Egypt's blue-chip index, gained 1.7% as most of its stocks rose, with Market heavyweight Commercial International Bank gaining 0.9%.

El Sewedy Electric jumped 5.9% after it partnered with General Authority For Suez Canal Economic Zone to establish a new company with issued capital of 1 billion Egyptian pounds ($58.82 million), in which the firm will own 49%. 

Abu Dhabi's index closed 1.1% higher, led by a 1.3% increase in the country's largest lender, First Abu Dhabi Bank .

Dana Gas jumped 4.1% after the energy firm said it had started drilling operations at Merak-1 well, offshore Egypt. 

National Marine Dredging soared 13.9% after last week reporting a higher first-quarter earnings.

The Dubai index rose 1% as all but one of its real estate stocks rose.

Emaar Properties, Dubai's largest listed-developer, increased 2.9% while its units Emaar Malls and Emaar Development were up 2.3 and 3% respectively.

The United Arab Emirates said on Tuesday that it will grant 6,800 foreign investors permanent residency under a new "Golden Card" system after they invested a combined 100 billion dirhams ($27.23 billion) in the Gulf state. 

National Cement Company was up 1.7% after news it had bought ARM Cement's Kenyan assets for $50 million.

Arabtec Holding rebounded 2.1%, snapping four straight sessions of losses on weak first-quarter earnings.

($1 = 3.7500 riyals)

($1 = 3.6730 UAE dirham)

($1 = 17.0000 Egyptian pounds)

(Reporting by Ateeq Shariff in Bengaluru Editing by Frances Kerry) ((; +918067497129;))