OT fell 3.6 percent to its lowest close since March 17, 2009. The firm has reluctantly agreed to negotiate terms for the nationalization of its Djezzy unit and now wants the deal concluded as quickly as possible, but the new conditions imposed by Algeria are likely to delay the process.

"There is fear and uncertainty over OT." said Tarek Abaza, Naeem Brokerage head of trading. "People don't know what's going to happen - how much the government will take (Djezzy) for."

Egypt's index fell 0.4 percent to 6,670 points.

Kuwait Finance House ended flat, having been down 3.3 percent intraday, after the Islamic lender posted a 23 percent decline in third-quarter profit.

"KFH's results were below expectations. We are of the view that this was mainly due to increasing provisions - its operating profitability hasn't changed and continues to do well," said Shahid Hameed, Global Investment House head of asset management for the Gulf region.

"KFH's shares have lagged in the banking rally of the past three to four months on expectations it would underperform in terms of earnings, so the Q3 numbers are largely already priced-in."

Kuwait's bank index fell 0.5 percent, trimming its gains to 33 percent since July 4.

The Kuwaiti index slipped 0.05 percent to 7,064 points.

Saudi Basic Industries Corp. (SABIC) climbed 0.5 percent to a five-month high, but disappointing bank earnings continued to weigh on Saudi Arabia's index.

Petrochemical product prices are up about 9 percent in October, said Hesham Tuffaha, Bakheet Investment Group head of research, boosting sector shares.

These have upside potential in the near term, he said, especially with product prices seen rising further if a new quantitative easing program by the US Federal Reserve meets expectations. This is seen pushing up equity and commodity prices as investors hedge their exposure to a weakening US currency.

The Saudi banking index eases 0.03 percent, taking its October losses to 4.1 percent.

The Tadawul All-Share Index (TASI) closed unchanged at 6,353.88 points. The sector activity for the day was mostly negative with 10 out of 15 sectors closing with losses ranging from 0.03 percent by the Banks & Financial Services sector to 0.99 percent by the Energy & Utilities sector. On the other side, the gains were witnessed only on five sectors ranging from 0.02 percent by the Transport sector to 0.94 percent by the Insurance sector. The overall market breadth for the day was negative with 44 advancers against 77 decliners giving it an AD ratio of 0.57, the Financial Transaction House (FTH) said in its daily market commentary.

The stock market for the day reached SR2.78 billion.

Emaar Properties was the main drag, falling 1.5 percent, as Dubai's index eased from Thursday's six-month high and Shakeel Sarwar, head of asset management at Securities & Investment Co. (SICO) in Bahrain, warned further gains were likely to be limited.

"This is because of the macro situation - real estate stocks are in distress, with huge over-supply in the market, while banks - especially those from Dubai - don't have any business to do," said Sarwar.

"So the economic fundamentals remain below average and therefore the gains such as we saw in September are not sustainable, despite attractive valuations."

Dubai house prices will sink another 11 percent before bottoming out in 2012, as oversupply delays any hopes of a recovery, a Reuters poll found last week.

The Dubai index dropped 0.7 percent to 1,765 points. The Abu Dhabi index eased 0.03 percent to 2,816 points.

The Qatari index fell 0.1 percent to 7,796 points.

The Oman index dropped 0.4 percent to 6,553 points.

The Bahrain index slipped 0.01 percent to 1,462 points.
 
— With input from agencies