DUBAI  - Saudi Arabia's stock index declined on Sunday, as political concerns weighed on investors after Iran's seizure of a British-flagged tanker in the Gulf.

Britain called Iran's action against the Stena Impero in the Strait of Hormuz on Friday a "hostile act".

"Markets are following the negative global lead as geopolitical risks take centre stage following the UK tanker seizure," said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital in Dubai.

Saudi shares shed 0.8%, with financial stocks seeing heavy losses ahead of an expected interest rate cut this month by the U.S. Federal Reserve. 

Saudi British Bank (SABB) was down 2.2%, Arab National Bank was down 1.7%, National Commercial Bank was down 1.1%, and Saudi Investment Bank was down 0.6%.

Other Gulf markets were mixed.

In Kuwait, profit taking sent the index down 1.2%.

"Kuwait is the best performing MENA market this year so far, up almost 20%, and so it is not surprising that some investors are taking profits," said Bhandari.

"We believe the market would continue to be well supported (up to its)... inclusion in the MSCI EM Index in mid-2020."

Ahli United Bank was down 2.5%, Kuwait Finance House was down 1.4%, and Kuwait International Bank was down 1.1%.

In Dubai the index was 0.9% lower, dragged down by the real estate sector. Construction firm Arabtec lost 2.3%, DAMAC Properties 2%, and Emaar Development 1.6%.

Dubai is in a real estate downturn that has seen prices fall by more than a quarter from a peak in mid-2014, hurting earnings of the emirate’s top developers and forcing construction and engineering firms to cut jobs and halt expansion plans.

In Abu Dhabi, the index climbed 0.3%, lifted by heavyweight First Abu Dhabi Bank, which was up 1%.

The lender, the largest in the UAE, last week rose 4% after posting a 5% increase in second-quarter net profit. 

FAB gave a boost to the sector, with Abu Dhabi Islamic Bank and Abu Dhabi Commercial Bank gaining 0.8% and 0.6% respectively.

Egypt's blue-chip index lost 0.7%, weighed down by real estate. Cairo Investment and Real Estate Development tumbled 4.2% and Orascom Development dropped 2.9%.

SAUDI ARABIA The index dropped 0.8% to 8,958 points

ABU DHABI The index gained 0.3% to 5,235 points

DUBAI The index lost 0.9% to 2,739 points

QATAR The index was flat at 10,501 points

EGYPT The index was down 0.7% to 13,576 points

BAHRAIN The index slid 0.2% to 1,534 points

OMAN The index  was up 0.6% to 3,771 points

KUWAIT The index  declined 1.2% to 6,664 points

($1 = 3.6728 UAE dirham)

(Reporting by Tuqa Khalid, editing by Davide Barbuscia and John Stonestreet) ((Tuqa.Khalid@thomsonreuters.com; +971521047568;))