Saudi Basic Industries Corp. (SABIC) lost 1.1 percent and Yanbu National Petrochemical Co. dropped 2.3 percent.

"We have Q3 around the corner so there is hesitation and people definitely don't want to take fresh positions," said a Riyadh-based trader who asked not to be identified.

"Uncertainty is also creeping back into global markets and US treasury yields are falling, which shows risk aversion is increasing. That is being translated into Saudi petrochemicals, which have come off in the past couple of days."

Petrochemicals are seen as a proxy for the world economy.

Samba Financial Group dropped 2 percent as Saudi banks fell.

"Banks' operational income continues to grow, but analysts don't know how much provisions they are likely to take," said Hesham Tuffaha, Bakheet Investment Group head of research.

"So people are wary of buying bank stocks, but this is offset by attractive valuations."

The Tadawul All-Share Index (TASI) fell 0.74 points to 6,403.93 points. The sector activity for the day was mostly negative with 2 out of 15 sectors closing with gains namely 0.10 percent by the Multi-Investment sector and 0.58 percent by the Energy & Utilities Sector. On the other hand losing sectors ranged from 0.02 percent losses by the Insurance sector to 1.68 percent by the Agriculture & Food Industries sector. The overall market breadth for the day was negative with 25 advancers against 107 decliners giving it an AD ratio of 0.23. The liquidity for the day reached SR2.16 billion, the Financial Transaction House (FTH) said in its daily market commentary.

Egypt's Talaat Moustafa (TMG) mounted a mid-session rally after its former chairman received a jail term at a retrial, following the overturning of a death sentence.

TMG, Egypt's biggest listed developer, ended 0.1 percent higher, having been up as much as 3 percent intraday. It has been highly volatile of late as investors bet on the outcome of a court case disputing a land sale for its $3 billion Madinaty project, while the murder trial of its ex-Chairman Hesham Talaat Moustafa has only added to intrigue.

"He (Moustafa) has been out of the picture for the past two years. I do feel that the positive reaction to the stock is more about the compound effect of the land issue," said Khaled Khalil of Beltone Financial.

The Egypt index rose 0.1 percent to 6,688 points.

Dubai's Emaar Properties fell 0.8 percent ahead of a board meeting on Wednesday, which will discuss mortgage affiliate, Amlak, a local newspaper said.

On Sunday, Dubai Islamic Bank acquired a controlling stake in rival mortgage provider, Tamweel. Amlak and Tamweel shares have been suspended since November 2008, pending a mooted merger of the two firms.

Both companies have struggled since the financial crisis destroyed their business model of funding long-term mortgage lending with short-term borrowing, while Dubai property prices have dropped some 60 percent from 2008 peaks.

"I don't think a merger will happen now — it looks like they will be solved as individual cases," said Samer Al-Jaouni, general manager of Middle East Financial Brokerage Co.

Dubai's index fell 0.5 percent to 1,690 points, declining for a second day since Sunday's 19-week peak. The Abu Dhabi index slipped 0.1 percent to 2,661 points.

"The market is mostly boring, with Dubai confirming 1,700 to 1,750 points is a resistance that needs a surge in volumes to break through," said Mohammed Yasin, CAPM Investment's chief investment officer.

The Kuwaiti index climbed 0.6 percent to 6,870 points.

The Qatar benchmark rose 0.2 percent to 7,647 points.