Global stocks were hit hard a day after ratings agency Standard & Poor's downgraded Greek government debt to "junk" status, while crude oil losses for the week totaled almost 5 percent before paring some of the losses.

"International sentiment remains extremely weak and that is what we are seeing in the regional markets today. There are no positive catalysts for the markets to move higher," said Ali Khan, managing director and head of brokerage at Arqaam Capital.

Dubai's index led losses in the region, dropping 1.9 percent to 1714 points, its lowest level in more than a month, while Saudi Arabia's benchmark fell 0.64 percent to 6,867.97 points. It was another highly negative and volatile day for the market, as only two sectors closed with positive gains, namely the Telecom & IT and the Multi-Investment sector, which saw gains of 0.02 percent and 0.30 percent respectively. Negative sector movement ranged from 0.12 percent in the Retail sector, to a loss of 2.72 percent in the Energy & Utilities sector. Overall market breadth was negative, with 31 advancers and 96 decliners recording an AD ratio of 0.32, the Financial Transaction House (FTH) said in its daily market commentary.

Market heavyweight Saudi Basic Industries Corp. (SABIC) dropped 1.18 percent to SR105.

Abu Dhabi Commercial Bank dropped 8.6 percent after reporting first-quarter results that missed analyst's forecasts. Abu Dhabi's benchmark fell 0.9 percent to 2,778 points.

"First quarter earnings from banks were not strong enough to move the markets higher," Ali Khan said.

Egypt's main index fell 1.4 percent to 7,501 points, hit hard by investor uncertainty over news Orascom Telecom (OT) or some of its assets may be sold to South Africa's MTN.

Orascom fell 1.9 percent. The stock has jumped more than 30 percent this month, mostly on talk it would offload its troubled Algerian unit Djezzy. 

"People are worried that a deal might not go through; that's why there is selling pressure today," said Hashem Ghoneim from Pyramids Capital.

In Kuwait, telecom operator Zain climbed 3 percent after India's Bharti said it expects to close its $9 billion deal to buy most of Zain's African operations by mid-May.

This helped the index buck a regional trend and rise 0.2 percent to 7,283 points, despite Agility shares falling 4.6 percent after saying there was no guarantee of it reaching a settlement with US authorities over fraud charges.

"There is no correlation between Kuwait and the (Gulf) or international markets," said Essa Al-Hasawi, a dealer at Noor Financial Investment Co. in Kuwait.

Qatar's index closed down for the third straight session with banking and property stocks being sold by investors.

"We need a pick up in international markets. If oil prices pick up and exceeds $85, then we should see related stocks like IQ pick up," said Thamer Jadallah, head of investments at Almana Group in Doha.

Oman closed flat after falling initially as banks helped to offset losses in industrial stocks.

"We believe any correction from current levels will provide good buying opportunity, as valuations are cheap in Oman with earnings visibility and healthy cash flows," said Ajeev Gopinath of Gulf Baader Capital Markets.
 
 
- With input from agencies