The Tadawul All-Share Index (TASI) plunged 3.89 percent to 5,323.29 points, slumping to its lowest close since April 22, 2009 and taking its losses to 19.7 percent since protests erupted in neighboring Bahrain on Feb. 14.

The sector activity for the day was all negative. The losing sectors ranged from 1.21 percent by the Telecommunication & Information Technology sector to 7.58 percent by the Insurance sector. The overall market breadth for the day was negative with 14 advancers against 131 decliners giving it an AD ratio of 0.10, the Financial Transaction House (FTH) — licensed by the Capital Market Authority (CMA) — said in its daily market commentary.

The Saudi stock market turnover for the day reached SR5.34 billion.

"The market is very jittery and panicking due to sentiment rather than fundamentals in the economy which are very solid. As Saudi investors are exiting we are seeing some foreign investors returning to the market which is now beginning to look very attractive. We have to wait and see if we'll test new lows next week," John Sfakianakis, chief economist at Banque Saudi Fransi, Riyadh, said.

He said no doubt the market will continue to operate and remain open as it gives confidence even if it continues to fall unlike the continuous closure of the Egyptian market. The level of political risk concerns are exaggerated but markets which have a tendency to get things very wrong think otherwise.

Jarmo T. Kotilaine, chief economist at the National Commercial Bank (NCB), said: "It is clear that anxiety about regional uncertainty has become the overriding concern on people's minds and this has turned into large-scale selling as investors seek to reduce their exposure to risks that are difficult to properly quantify or assess."

Kotilaine said: "Without a doubt, what we are seeing is an overreaction and hopefully one that turns into an attractive buying opportunity before long. But for that to happen, a more positive agenda will have to emerge: A credible way of addressing the regional stress points and a better understanding of the remaining risks. Investors are craving good news but, right now at least, mainly seeing question marks."

In the banking sector, Al-Rajhi Bank, the Gulf Arab region's largest listed lender, fell 8.04 percent while Banque Saudi Fransi dropped 7.29 percent. Bank Albiland and SABB shares slid 7.80 percent and 6.35 percent respectively.

According to Reuters, Banque Saudi Fransi's chairman, Ibrahim Al-Touq, resigned on Wednesday due to health and family reasons, the lender said in a statement to the Saudi bourse.

"(The resignation) will take effect from ... April 1 and is due to family and health circumstances," the statement said. A new chairman will be announced later, it said.

Dubai Financial Market's benchmark index dropped 3.5 percent to close at 1,374 points, its lowest finish since June 2004.

Shares of the Dubai developer of the world's tallest tower, Emaar Properties, plunged 6 percent Wednesday. The Dubai Financial Market's own shares shed 4.9 percent, the Associated Press said. Abu Dhabi's benchmark fell 1.8 percent to 2,527 points.

Doha's index declined 3.4 percent to 7,669 points, its lowest finish since Sept. 28 and taking its year-to-date losses to 11.7 percent.

The Kuwaiti index fell 2.6 percent to 6,158 points, its lowest finish since Nov. 2004.

Stock sell-offs in Asia and Europe and a lack of a clear end game for the regional unrest give investors little incentive to buy into regional markets, analysts say.

Gold prices surged to a new record high in Europe on Wednesday, as the threat that violence in the Middle East and North Africa will spread supported interest in the metal as a haven from risk, Reuters said.

Gold leapt as high as $1,437.70 per ounce on the London Bullion Market at about 1330 GMT. That beat the previous high of $1,434.93 that was struck late on Tuesday.

Spot gold was bid at $1,430.30 an ounce at 1031 GMT against $1,433.70 late in New York on Tuesday, having peaked that day at an all-time high of $1,434.65. US gold futures for April delivery rose 10 cents to $1,431.30.

Reacting to surging gold prices, Sfakianakis said: "Gold is seen as a safe haven in terms of less prudent monetary policy by the US and concerns about global inflation and concerns about growth. In the event of a weaker dollar gold could appreciate further and in the event of more problems emanating from euro zone economies the greenback could get stronger. Those who are calling for a gold rally are playing on global fears of inflation, weaker dollar and commodities super cycle. There are plenty of those around now."

Kotilaine said: "We went through a moment earlier in the year when growing confidence about the global recovery looked like it might at least significantly check gold's rally. Now, however, with economic and political risks once again looming large, the gold bears have been confounded. Gold remains the ultimate safe haven to most investors."

Kotilaine said: "Echoes of the 1970s are ringing loud and clear. With people worried about oil and stagflation, gold shines ever more brightly."