A proposal by Venezuela President Hugo Chavez to try to broker a peace deal in Libya briefly pushed oil prices lower and briefly helped stocks markets make some gains. But the benefit was short-lived amid reports of continued fighting in Libya, including air strikes against rebel positions.

The Saudi bourse was closed on Thursday, the start of the Saudi weekend, but a sharp fall on the region's most influential market a day earlier still weighed on the Gulf.

Dubai was the biggest loser on Thursday, as its index fell to a new 6-1/2 year low, ending 1.6 percent lower at 1,352 points. The Abu Dhabi index gained 0.1 percent to 2,530 points.

"The geopolitics of the region is a major concern for investors," said Marwan Shurrab, vice president and chief trader at Gulfmena Alternative Investments.

"Traders will still prefer to stay on the sidelines. News of the peace deal did move the markets a bit but traders are not fully convinced. There is no catalyst for a rally."

Heavyweight Emaar Properties fell 3.6 percent and Dubai builder Arabtec dropped 4.9 percent.

In Qatar, Islamic lender Masraf Al-Rayan sagged 7 percent as the Doha index was also weighed down by regional political unrest.

"Qatar gained initially, but at very low volumes. As volumes grew, the shares fell," said Shurrab.

The Doha index ended down 2.2 percent to 7,489 points, its lowest value since Sept. 8.

The Kuwaiti index dropped 0.2 percent to 6,148 points. Zain made its biggest gains in more than five months after the UAE's Etisalat said on Wednesday that it was still interested in buying a controlling stake in the company for $12 billion. Zain climbed 4.7 percent to 1.3 dinars.

Etisalat, which offered 1.7 dinars a share for the stake to a consortium led by Kuwaiti conglomerate Kharafi Group, missed its due diligence deadline this week.

"The Kharafi group is probably pretty frustrated by the relatively slow progress of due diligence, with Etisalat missing various deadlines," said Martin Mabbutt, Nomura telecoms analyst.

"Whether the deal is off, we simply don't know. If I was a shareholder and I had already pledged my shares to Etisalat, I would be pretty happy with the price agreed."

The Omani index rose 0.8 percent to 6,352 points, while the Bahraini measure fell 2.3 percent to 1,377 points.

Meanwhile, US stocks jumped as weekly jobless claims fell to their lowest in more than 2-1/2 years on Thursday.

World stocks as measured by MSCI were up 0.8 percent and, on Wall Street, the Dow Jones Industrial Average was up 156 points, or 1.3 percent.

Rising oil and other commodity prices are pushing up prices for goods around the world, causing the heightened concern about inflation risks.

The latest batch of purchasing managers' indexes (PMI) in Europe and elsewhere again pointed to fast-building inflationary pressures, with Europe's private sector surging at its fastest pace in almost five years in February, slightly faster pace in February and was at the highest level since August 2005.

The Dow was last up 159.27 points, or 1.32 percent, at 12,226.07, while the Standard & Poor's 500 Index was up 15.45 points, or 1.18 percent, at 1,323.89. The Nasdaq Composite Index was up 40.09 points, or 1.46 percent, at 2,788.16.

As stocks rose, US bonds fell. The benchmark 10-year note was down 15/32, its yield rising to 3.53 percent from 3.47 percent on Wednesday, after the jobless data.

The euro pierced resistance around $1.3958, its 200-week moving average, to hit as high as $1.3976, its strongest since Nov. 8 and on track to test the psychologically important $1.40 level.

Spot gold fell as low as $1,417.22 an ounce.