DUBAI- Stock markets in the Gulf extended losses on Sunday reflecting a cautious mood among investors following last week’s oil tanker attacks.

The attacks on the tankers in the Gulf of Oman on Thursday raised fears of a military confrontation in a vital shipping route for global oil supply and heightened tensions between Iran and the United States, which have been in a standoff over Iran’s nuclear programme.

The Saudi index had dropped 1.6% on Thursday and fell a further 0.6% on Sunday after slight gains in early trade.

Most Saudi banks were down, despite Sunday's announcement by Saudi British Bank that its merger with Alawwal Bank was completed. 

The two banks have combined to create the country’s third largest lender, becoming a single listed company after regulatory approvals. SABB's shares shed 0.1%.

Alinma Bank, however, gained 0.4%, and was one of the stocks registering the highest trading volume on Sunday.

In the UAE, the Dubai and Abu Dhabi indexes .ADI fell 0.7% and 0.2%, respectively.

The Dubai market had risen earlier in the day, boosted by DAMAC Properties and Union Properties, which closed up 2.2% and 0.5%, respectively.

But heavyweight Emaar Properties – the largest developer in the emirate – fell 2.5%, weighing on the index.

Dubai’s telecom operator Du (Emirates Integrated Telecommunications Co) shed 0.4%, reversing earlier gains, after it said the UAE sovereign wealth fund Emirates Investment Authority had increased its stake by buying 463.3 million shares from Mamoura Diversified Global Holding and General Investments. 

In Abu Dhabi, blue chip companies Aldar Properties, First Abu Dhabi Bank FAB.AD and Abu Dhabi National Oil Company for Distribution were down 1.7%, 0.1% and 0.4%, respectively, dragging down the main index.

The other Gulf markets were all in the red, except for the Bahrain index .BAX , which rose slightly.

In Egypt, the index gained 0.2%, boosted by a 4.5% gain by Pioneers Holding Company for Financial Investments.

The company said on Sunday one of its divisions – Arab Dairy Products – had received a letter of intent from a Netherlands based company about a plan to buy it. 

(Reporting by Davide Barbuscia. Editing by Jane Merriman) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))