Middle East jitters weigh on most regional markets; energy shares cheer Saudi

By Ateeq Shariff and Md Manzer Hussain

March 3 (Reuters) - Most Gulf stock markets ended lower on Tuesday, with the Qatar benchmark extending its decline after the country halted liquefied natural gas production amid an escalating air war in the region, while Egypt slipped for a third day.

Israel broadened its campaign with new strikes on Iran and Hezbollah, while Tehran launched missiles and drones toward Israel, several Gulf states and a British air base in Cyprus, raising concerns of a prolonged conflict.

Qatar's state-owned QatarEnergy, 82% of whose clients are in Asia, was set to declare force majeure on its LNG shipments after Iranian drone attacks on facilities in the sprawling Ras Laffan complex.

The country's benchmark index .QSI trimmed early losses to close 0.7% lower, pressured by a 1.9% drop in Qatar National Bank QNBK.QA, the Gulf's biggest lender by assets.

Among gainers, petrochemical firm Industries Qatar IQCD.QA advanced 2% and Qatar Fuel QFLS.QA was up 1.9%.

Risk-off sentiment still dominates the Qatari exchange, though losses have eased compared with the sharper declines in earlier sessions. Any rebound will likely hinge on how regional tensions evolve and whether disruptions inside Qatar persist, said George Pavel General Manager at Naga.com Middle East.

Qatar condemned Iranian attacks on its territory and said, in a letter to the U.N. Secretary-General and the president of the Security Council on Monday, that it reserved the right to retaliate.

In Muscat, the index .MSX30 retreated 1.5% in broad declines, while the Kuwaiti index .BKP reversed early losses to finish 0.9% higher.

Gulf Cooperation Council sovereign wealth funds can play a pivotal role in supporting local equity markets by boosting liquidity and deploying additional capital to strengthen investor sentiment. This is an ideal moment to channel that support through fund-of-funds structures, said Samer Hasn, senior market analyst at XS.com.

Meanwhile, oil prices rose for a third straight day on Tuesday as threats to shipping through the Strait of Hormuz heightened fears of supply disruptions.

Iran's Revolutionary Guards commander said on Monday that the strait was closed and warned that Iran would set on fire any ship attempting to pass, Iranian media reported.

Saudi Arabia's benchmark index .TASI rose 0.7%, lifted by a 0.9% rise in Rajhi Bank and a 1.9% climb in oil major Saudi Aramco 2222.SE, while petrochemical maker Saudi Basic Industries Corp 2010.SE, in which Aramco owns 70%, added 4.2%.

The Saudi energy index .TENI advanced 1.8%.

Among individual stocks, Saudi budget carrier flynas 4264.SE extended declines to a third session, losing 2.8%, as air travel in the region was hit.

According to Hasn, the Saudi market is showing unexpected resilience despite the rapid and sudden spread of war, which is affecting various essential infrastructure sectors across the GCC.

"Investors appear to be banking on the hope that the conflict will not be prolonged, alongside expectations of extensive Saudi government support for the affected sectors."

Elsewhere, Bahrain's index .BAX eased 0.3%.

Meanwhile, UAE's Securities and Commodities Authority said the Abu Dhabi Securities Exchange and the Dubai Financial Market would remain closed on Tuesday, citing its supervisory and regulatory mandate over the country's capital markets. They were closed on March 2 too.

Outside the Gulf, Egypt’s blue-chip index .EGX30 extended its loss to a third consecutive session and slid 2%, with most stocks declining.

Egyptian equities extended their slide, with the market's ongoing correction deepened by regional instability. Sentiment remains weighed by risks to foreign direct investment, Suez Canal revenues, tourism, and gas supplies, said Pavel.