They expected Arab bourses, particularly in the Gulf region, to come under fresh pressure this week if the Republicans and Democrats fail to reach a compromise that averts a catastrophic default by the deadline of Tuesday.

"I believe stock markets in the Gulf region stand to suffer more losses early next week if efforts fail to raise the US debt ceiling,” an Amman-based portfolio manager told Arab News.

"Arab markets will also come under an additional pressure because the US economy grew at a pace slower than expected in the second quarter,” he said.

Saudi shares lost fresh ground last week as investors continued to be obsessed by the US budget-cutting woes.

The Tadawul All Share Index (TASI) of the Arab world’s largest stock exchange, shed 0.69 percent on weekly basis, closing at 6,445.17 points.

"Apparently, the Saudi stock market has ignored the good results of Saudi firms in the second quarter and, instead, is watching what happens in the US and Europe,” said Mohammad Emran, member of the Saudi Economic Society.

"The ambiguity is expected to dominate the market next week as the community of Saudi investors will monitor what kind of political agreement the Republicans and Democrats are going to strike by Tuesday,” he added.

Emran expected stocks to be negatively affected in the coming weeks by the traditional liquidity crunch and the absence of moving factors in Ramadan.

Emran, however, said Saudi stocks stood to gain in the medium term, finding support from the Saudi economic fundamentals— the huge volume of public spending, high oil prices and good profits of listed firms.

Kuwaiti shares also closed in the red last week, led by the real estate, investment and services sectors.

Kuwait’s KSE all-share index fell 0.68 percent on weekly basis, closing at 6,036 points.

The benchmarks of the UAE stock exchanges of Dubai and Abu Dhabi shed 1.13 percent and 2.42 percent to close week respectively at 1,506 points and 2,628 points.

Qatar’s all-share index lost 0.19 percent last week, closing at 8,377 points while Bahrain’s benchmark closed 0.37 percent in the red, at 1,298 points.

The all-share index of the Amman Stock Exchange (ASE) closed week marginally lower at 2,089 points.

Egypt’s AGX 30 index, which measures the performance of the market’s 30 most active stocks, plunged for the seventh week in a row, losing 2.2. percent on weekly basis and closing at 5,022 points.

The Egyptian stock exchange came under pressure from foreign selling and worries over what could happen during Friday rallies, analysts said.