Saudi's index fell 1.6%, with Riyad Bank 1010.SE down 3.6% and Banque Saudi Fransi sliding 5.4%.
Oil prices fell nearly 3% on Wednesday as China signaled it would use rare earths in its trade war with the United States, stoking concerns that an ongoing stand-off could hurt crude demand.
"Sentiment is weak on geopolitical and global economic noise," said a Saudi-based analyst at one brokerage.
The index eased back from a seven-month high, driven by foreign investors stepping in during the extended closing auction in the last session.
"Yesterday was the MSCI event, whereby Saudi stocks were included in MSCI EM Index leading to significant traded value in the auction period and increase in index levels," said Devassy Pritish, head of equity research at Al Rajhi Capital.
"So, the decline today is related to cooling off of this event," Pritish added.
The Abu Dhabi index rose 1.6%, led by the United Arab Emirates' largest lender, First Abu Dhabi Bank, which rebounded 3.3% to 14.3 dirhams.
The stock hit a record high of 17 dirhams in the second half of April following a foreign ownership limit hike to 40% from 25%.
But the lender has seen cooling since then, under pressure from the global trade dispute and geopolitical worries, and as MSCI retained its foreign inclusion factor at 25%, disregarding the foreign ownership limit rise.
Qatar's index closed 0.4% higher, as gains in banks offset losses in other sectors. Qatar National Bank was up 3.8% while Qatar Commercial Bank climbed 3.4%.
In Dubai, the index fell 0.3%, mostly pulled down by Emaar Group companies. Blue-chip developer Emaar Properties shed 1.1%, while its units Emaar Malls and Emaar Development fell 2.1% and 2.3% respectively.
Egypt's blue-chip index was down 0.4%, with El Sewedy Electric losing 2.8% after on Tuesday reporting a near 30% drop in the first-quarter profit.
(Reporting by Shakeel Ahmad in Bengaluru Editing by David Holmes) ((firstname.lastname@example.org;))