Saudi Arabian Fertilizers Co. (Safco) was the main driver in the Saudi index, rising 2.9 percent after saying it would pay a dividend of SR7 ($1.87) per share. 

Saudi Basic Industries Corp. (SABIC), which will pocket $200.3 million as dividends from Safco, however fell 0.3 percent in late selling.

"There is no reason to think Saudi markets may correct unless there is some big negative news coming," said Youssef Kassantini, an independent analyst.

The Tadawul All-Share Index (TASI), on its longest rally for more than one year, gained 0.07 percent to 6,479.15. It had touched a 17-week high on Saturday. All sectors except three closed positive on Sunday. Sectors closing with losses were the Petrochemical Industries, Hotel & Tourism and the Industrial Investment sectors which were down 0.24 percent, 0.43 percent and 0.49 percent respectively. Sector gains ranged from 0.03 percent in the Real Estate Development sector to a gain of 0.72 percent in the Cement sector. Overall market breadth was negative however, with 53 advancers and 63 decliners registering an AD ratio of 0.84, the Jeddah-based Financial Transaction House (FTH) said in its daily market commentary.

Kuwait's index gained 0.3 percent to 7,419 points for a second consecutive day after Credit Suisse upgraded the Gulf state's stocks.

Zain rose 1.6 percent on reports that the telecoms firm and India's Bharti Airtel are expected to sign a letter of intent for a $9 billion African assets deal this week.

Qatar's index traded up, helped by a surge in Barwa Real Estate shares which rallied 3.2 percent. Barwa has climbed after saying last week it was in talks to sell Barwa Financial district to Qatar Petroleum. The measure rose 0.5 percent to 6,950 points.

"We believe Qatar stocks are quality stocks and are trading at a PE of 12, which is cheap compared to most of the region, but the Gulf isn't a great story at the moment and so Qatar is likely to remain range-bound," says Keith Edwards, head of asset management at Doha-based The First Investor.

Oman's index, which hit a 15-month high on Thursday on foreign buying, edged up 0.04 percent to 6,798 points, backed by a 2.4 percent rally in Raysut Cement which announced its dividend.

"Healthy dividend announcements have strengthened investor sentiments in the market," Ajeev Gopinath, assistant vice president, asset management at Gulf Baader Capital Markets said.

However, UAE markets slipped as investors remained on the sidelines awaiting more clarity on Dubai's debt issues.

Dubai's index dropped 0.1 percent to 1,624 points after gaining earlier in the day while Abu Dhabi's index fell 0.4 percent to 2,755 points, weighed down by Emirates Telecommunications Corp. (Etisalat) which fell 1.3 percent.

"There are lots of question marks that remain (about Dubai's debt)," said Chamel Fahmy, regional sales trader at Beltone Financial.
 
- With input from agencies