Saudi stocks suffered their biggest intraday decline since mid-October on Monday after Riyadh said two of its oil tankers were among those targeted in attacks on commercial vessels near United Arab Emirates.
Other Gulf markets were also in the red, with Dubai index plunging 2.8% and Abu Dhabi index falling by 2.5%.
Saudi Arabia's index declined 2.7%, with Al Rajhi Bank dropping 2.6% and its top petrochemical maker Saudi Basic Industries falling 2.4%. The index was down 9 percent since the start of May.
Saudi Arabia said on Monday that two Saudi oil tankers were among vessels targeted by a "sabotage attack" off the coast of the UAE, condemning it as an attempt to undermine the security of global crude supplies.
The UAE said on Sunday that four commercial vessels were hit by sabotage near the emirate of Fujairah, just outside the Strait of Hormuz, without giving details of the nature of the attacks.
"Regional geopolitical tensions and the U.S.-China trade row are affecting market sentiment," said Nishit Lakhotia, head of research at Bahrain-based SICO. "Investors will take any opportunity to lock in profit after the recent gains, especially in Saudi Arabia."
Shares in National Shipping Company of Saudi Arabia (Bahri) 4030.SE dropped 3.3%, after trading and shipping sources identified the Saudi vessels targeted as Bahri-owned very large crude carrier Amjad and crude tanker Al Marzoqah.
Bahri did not respond to a request for comment.
Gulf Union Cooperative Insurance slumped 10% after it posted a first-quarter loss before zakat, citing increased net incurred claims.
Arabian Shield Cooperative Insurance plunged 9.9% after it reported lower net profit before zakat for the same period.
The Dubai index was down 2.9% with financial and real estate stocks hit hard. The emirate's largest bank, Emirates NBD, fell 1.4% and the emirate's largest listed developer, Emaar Properties, lost 4.8%.
Financials also pushed Abu Dhabi's index down, by 2.5%. First Abu Dhabi Bank, the UAE's biggest bank, shed 3.1%.
Waha Capital was down 8%, a day after the investment firm reported a net loss of 57.8 million dirhams because of a revaluation of its investment in global aviation leasing firm Aercap.
Qatar's index lost 2.1%, partly weighed down by Commercial Bank, which fell 2.9%
(Reporting by Shakeel Ahmad in Bengaluru and Saeed Azhar in Dubai Editing by Raissa Kasolowsky) ((Saeed.Azhar@thomsonreuters.com; +971 44536787; Reuters Messaging: email@example.com))