Foreign investors are dumping Middle East stocks and many local investors are trying to beat them to the punch, exacerbating declines, traders said.

"As the populace throughout the region attempts to take on ever more tyrannical regimes, we will be faced with increasingly violent protest and consequently greater uncertainty," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"This will manifest itself in higher oil prices and, paradoxically, weaker MENA equity markets.

"There is little to no chance of the region regaining the status quo (of) the beginning of the year, so for now, risk continues to outweigh opportunity."

Dubai's index fell 2.4 percent to 1,479 points — its lowest close since Aug. 16.

Logistics provider Aramex dropped 7.4 percent. At Tuesday's close, 35 percent of its shares were held by foreigners, the second-highest total among primary listings on Dubai's bourse.

"Foreign investors have sold huge amounts and support and resistance levels don't matter right now," said Hani Girgis, assistant chief dealer at Dlala brokerage in Doha.

Qatar fell 3.6 percent to 8,185 points, its biggest drop since May 25 and lowest close in 12 weeks, wiping out all gains from its World Cup bid rally. Qatari stocks had soared since it was chosen to host the 2022 soccer event in December, Reuters said.

Commercial Bank of Qatar fell 9.9 percent as it went ex-dividend. CBQ was a favored Doha pick for foreign funds because it has a global depository receipt listing in London.

"With oil prices holding up and positive catalysts like Qatar 2022 and Kuwait and Saudi's expansionary budgets, 2011 was looking like a good year to be invested in the region, but political unrest has thrown a wrench into everyone's forecasts," said Akram Annous, MENA strategist at Al Mal Capital.

Credit default swaps (CDS) for Egypt climbed 19 basis points to 375 bps on Tuesday and those for Dubai rose 12 bps to 450 bps, while on Monday, Bahrain's hit an 18-month high and Qatar a 12-month peak.

Saudi Arabia's Tadawul All-Share index (TASI) dropped 0.35 percent to 6,277.03, declining for an eighth session, although it eased away from a 24-week intraday low, which may indicate selling pressure is waning. Samba Financial Group fell by 2.7 percent dairy producer Almarai by 2.3 percent.

The sector activity for the day was mostly negative with 10 out of 15 closing with lose ranging from 0.07 percent by the Energy & Utilities sector to 1.23 percent by the Agriculture & Food Industries sector. On the other hand the gaining sectors were ranged from 0.09 percent by the Petrochemical Industries sector to 2.95 percent by the Multi-Investment sector. The overall market breadth for the day was negative with 53 advancers against 14 decliners giving it an AD ratio of 0.67, the Financial Transaction House (FTH) — licensed by the Capital Market Authority (CMA) — said in its daily market commentary.

The liquidity for the day reached SR3.14 billion.

"Our markets are not on emerging market benchmarks and so international investors sell at the first signs of a negative situation," said Rami Sidani, Schroders Middle East head of investment. "The political situation continues to dictate market performance."

Kuwait's Zain rose 3.1 percent after a local newspaper report said new potential bidders have emerged for the telecoms operator's stake in its Saudi unit.

The Kuwaiti index dipped 0.1 percent to 6,418 points.

The Omani index fell 1.5 percent to 6,730 points.

The Bahrain measure rose 0.2 percent to 1,468 points.