MIDEAST STOCKS-Most Gulf stocks retreat amid deadlocked US-Iran talks

May 11 (Reuters) - Most major Gulf stock markets declined in early Monday trading amid signs that U.S.-Iran talks had stalled, leaving the crucial Strait of Hormuz effectively closed.

U.S. President Donald Trump on Sunday dismissed Iran's response to a U.S. proposal for peace talks aimed at ending the war, calling Tehran's demands "totally unacceptable."

According to Iranian media, Tehran's proposal called for a comprehensive end to the war, the lifting of sanctions, reparations, and recognition of its control over the strait.

Iran has effectively closed the strait since the war began in late February, disrupting a vital corridor that typically carries about a fifth of the world's oil and gas.

Dubai's main share index .DFMGI dropped 0.5%, hit by a 0.8% fall in blue-chip developer Emaar Properties EMAR.DU and a 1% slide in toll operator Salik SALIK.DU.

Among other losers, budget airline Air Arabia AIRA.DU declined 1.7%.

In Abu Dhabi, the index .FTFADGI retreated 0.8%, with Aldar Properties ALDAR.AD losing 1.4%.

The United Arab Emirates' air defences dealt with two drones coming from Iran on Sunday, the Defence Ministry said, the latest in renewed attacks on the oil-rich Gulf country.

Saudi Arabia's benchmark index .TASI added 0.2%, helped by a 0.5% rise in oil major Saudi Aramco 2222.SE, a day after reporting a 25% rise in first-quarter profit, as its East-West pipeline ran at full capacity to offset disruptions from U.S.-Iran tensions in the Strait of Hormuz.

The Qatari index .QSI eased 0.1%.

A cargo vessel travelling from Abu Dhabi was struck by a drone on Sunday in Qatari waters northeast of Mesaieed port, causing a small fire that was quickly contained, Qatar's Defence Ministry said. No injuries were reported, and the vessel continued on its way to the port.