Most other regional markets also fell, with Oman dropping to an 10-month low as quarterly earnings hit investor sentiment.

Dubai's government took control of troubled Islamic lender Dubai Bank on Monday to stave off a potential collapse that would undermine the emirate's banking sector.

Dubai Bank shareholder Emaar Properties fell 2.2 percent. The index fell 1.4 percent to 1,563 points — its lowest level since April 7.

"The market is seeing a knee-jerk reaction to this, but on a less immediate term basis, this is a positive development for Emaar because it removes uncertainty," said Ibrahim Masood, senior investment officer at Mashreq Bank. "The investment didn't really jell with Emaar's business.

Emaar's 30 percent stake in Dubai Bank may have to be written down because a rescue by the government would not follow a normal course of business, Masood added.

Abu Dhabi's index fell 0.5 percent to 2,641 points — its lowest level since April 12, as banking and property stocks weighed, with Aldar Properties dropping 2.1 percent.

Egypt's main index rose 1.3 percent to 5,127 points, notching up its biggest single session gain in more than a month as investors hunted for bargains among heavily discounted shares.

The benchmark rose for the sixth day in a row, led by real estate firms which extend a rally that began on Sunday.

Talaat Mostafa Group, the index's biggest gainer, ended 5.6 percent higher and Palm Hills Developments gained 5.4. Egyptian Resorts added 3.5 percent.

"Most of the cash entering the market is going into the most pressured stocks," said Amr Shamel of Pharos Securities, adding that trading volumes were up.

Oman's index fell to a 10-month low as local investors stayed on the sidelines. The benchmark fell 0.3 percent to 6,134 points — its lowest level since July 22.

"We're are seeing very low contribution from investors ... you can see the sentiment is negative," said Adel Nasr, United Securities brokerage manager.

Most companies except one in the banking sector posted below-expectation first-quarter earnings, and that may have a prolonged affect on the market, he added.

Losses across most sectors dragged Saudi Arabia's Tadawul All-Share Index (TASI) 0.85 percent lower to a one-week low at 6,634.03 points, with petrochemicals slumping to a four-week low amid declining oil prices.

The petrochem index fell 1.3 percent. Yanbu National Petrochemical Co. led losses and closed 2.5 percent lower. Saudi Basic Industries Corp., the largest company by market value in the Gulf, slid 0.9 percent.

"Retail player's positions have shifted to locally driven small to mid caps, especially construction and agriculture stocks, and will continue to stay so to avoid relative exposure to global commodity markets," said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The Kuwaiti measure climbed 0.4 percent to 6,469 points. The Qatari index gained 0.2 percent to 8,681 points.

The Bahraini measure eased 0.4 percent to 1,377 points.