ENBD dropped 4.3 percent to a 27-week low after sinking 1.6 percent on Tuesday, while the Dubai index slipped 0.3 percent to 1,384 points — its lowest close since March 7.

Investors said they saw little benefit from the takeover for ENBD as it would probably have to deal with any losses accumulated by Dubai Bank. But they also predicted the downside would be minor.

"We estimate that even in the worst case scenario, the impact on ENBD, based on simplistic assumptions, is likely to be limited," EFG Hermes said in a note. "DB is a much smaller entity compared to ENBD."

In Oman, shares fell 0.8 percent to a seven-week low, led by weakness in bank stocks. The index closed at 5,519 points.

"We saw strong selling pressure from asset managers in the country," said Adel Nasr, United Securities brokerage manager in Muscat. "They started to liquidate and foreign institutionals have their own fears over the European crisis. They want to keep cash on the side."

Heavyweight Bank Muscat shed 0.8 percent, Bank Dhofar slipped 0.2 percent and National Bank of Oman declined 2.6 percent. Bank Muscat reported a 15.8 percent increase in third-quarter net profit on Wednesday, edging ahead of analysts' forecasts.

In Kuwait, telecoms operator Zain fell 1.1 percent. Affiliate Zain Saudi reported a narrower third quarter loss on Wednesday but the results still missed estimates; its stock ended flat. The measure declined 0.2 percent to 5,848 points.

Saudi Arabia's shares fell for a second day as investors booked profits in insurance stocks. The Kingdom's benchmark Tadawul All-Share Index (TASI) slipped 0.22 percent to 6,105.04 while the insurance index fell from Tuesday's four-month high, dropping 1.6 percent.

In Egypt, foreign institutions and funds bought into beaten-down stocks with heavyweight Orascom Construction Industries (OCI) climbing 4.5 percent. The index rose 0.8 percent to 4,050 points, trimming its 2011 losses to 43.3 percent.

"There is talk in the market that foreign institutions and funds are snapping up Egyptian blue chips, which are at very low prices," said Osool Brokerage's Mohamed Swefy.

But a sharp rebound of the index off an intra-day low of 3,820 points in the past three days, to a close of 4,050 on Wednesday, suggests the market may have found a fairly solid bottom because of cheap valuations, though many analysts think an extended rally is unlikely given political tensions.

Qatar's benchmark index bucked the regional trend and rose 0.8 percent to 8,418 points — a two-week high. Traders said institutions were buying in ahead of quarterly earnings, and were attracted by cash dividends from bank stocks at year-end.

Commercial Bank of Qatar gained 2.8 percent, Qatar National Bank rose 0.6 percent and Doha Bank climbed 1.3 percent.