S&P cut Egypt's credit rating by one notch, saying the transition to a new government has increased risks to macroeconomic stability.

The index rose 1.2 percent to 4,264 points with blue chip stocks supporting. 

Orascom Construction gained 0.8 percent, Commercial International Bank rose 1.6 percent and real estate firm Talaat Mostafa climbed 3.6 percent. 

"This is a positive indicator that the market is still able to maintain coherency despite Standard & Poor's downgrading of Egypt's rating," said Fady Azeem el-Dawla of Naeem Brokerage. 

Shares in Egyptian private equity firm Citadel Capital jumped 5.5 percent after saying it plans to further strengthen its balance sheet in the next three months through fund-raising measures or small disposals. It completed a $176 million rights issue on Wednesday.

Traders said the market was also helped by strong performances on Wednesday in many international markets.

In Saudi Arabia, Rabigh Refining and Petrochemical (PetroRabigh) tumbled 10 percent after its third-quarter net loss widened, weighing on the Kingdom's index. 

Rabigh reported a net loss of SR280.6 million ($74.81 million) as maintenance work at the refinery cut sales.

Telecoms operator Etihad Etisalat (Mobily) fell 2.8 percent after its quarterly profit missed estimates.

"We would view a pull back in the share price as a buying opportunity," Simon Simonian, Shuaa Capital telecoms analyst, wrote in a research note. "While growth has been decelerating, we expect the company to deliver low double-digit earnings growth in 2012." 

Saudi Arabia's shares end lower by 0.71 percent at 6,106.74 points on the final day's trading before the weekend. 

Elsewhere, Qatar National Bank (QNB) led the decline on the index which slipped for a second day, down 0.3 percent to 8,376 points.  

Shares in QNB fell 1.4 percent after saying it has entered negotiations to acquire Denizbank, the fast-growing Turkish arm of euro zone debt casualty Dexia, in a deal potentially worth up to $6 billion.

The move is seen as a positive investment for the bank, but shareholders are worried about the cash drain the investment would require. 

"The market is still swinging in a trading range," said a Doha-based trader on condition of anonymity. "Over the short term things are fuzzy and still looking for direction. It looks more bearish than bullish unless we penetrate the 8,500 points." 

Meanwhile, Dubai's index rose 0.4 percent to 1,363 points, up from Tuesday's fresh seven-month low with upbeat global sentiment helping lift some of the gloom. 

Emaar Properties gained 0.8 percent, Dubai Financial Market rose 2.2 percent and telecom operator Du was up 1.4 percent. 

"Today, as international markets are more stable and picking up, GCC markets are also responding positively," said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain. 

Abu Dhabi's benchmark failed to make gains despite property stocks rebounding from their all-time lows. The index eased 0.04 percent to 2,446 points.     

Aldar Properties and Sorouh Real Estate climbed 1 and 3.4 percent respectively, with investors fishing from the bottom. The index eased 0.04 percent. 

The Omani index slipped 0.1 percent to 5,532 points.  

The Kuwaiti index declined 0.2 percent to 5,884 points. 

The Bahraini measure eased 0.06 percent to 1,147 points.