Cairo's index climbed 0.8 percent to 4,020 points as hopes were high for a smooth transition to civilian rule next year, traders said.

But gains were limited by an uncertain policy outlook as the country's army rulers, under pressure to close a budget funding gap and address a rapid decline in foreign reserves, scramble to replace the cabinet that resigned last week.

"The index is up but by other measures the market is actually flat," said Omar Darwish at brokerage CIBC. 

Property developer Talaat Moustafa soaked up the most trading volume, gaining 2.5 percent, on optimism over a Nov. 22 court ruling that approved a long-disputed sale of state land for the company's biggest project.

Dubai's benchmark climbed 0.6 percent to 1,379 points, extending gains for a third day since Sunday's seven-year low. Emaar Properties rose 1.5 percent, Dubai Investment climbed 2.6 percent and Emirates NBD added 0.3 percent.

Abu Dhabi's index also gained, climbing 0.4 percent as banks supported.

First Gulf Bank climbed 2.7 percent, National Bank of Abu Dhabi rose 1.4 percent and Abu Dhabi Commercial Bank lifted 1.8 percent.

"The salaries increase was seen as very positive in the market," said Marwan Shurrab, vice-president and chief trader at Gulfmena Investments.

"It triggered a move in securities with strong consumer spending, especially banks."

UAE markets are closed on Thursday for a holiday.

In Saudi Arabia, the index slipped 0.1 percent to 6,105 points extending 2011 losses to 7.8 percent.

Banks weighed with SAAB falling 4.4 percent, Banque Saudi Fransi down 1 percent and Saudi Investment Bank shedding 1.3 percent.

In Kuwait, the index closed 0.2 percent higher at 5,812 points after reports the emir will name outgoing Defense Minister Sheikh Jaber Al-Mubarak Al-Sabah as the country's new prime minister.

Other Gulf markets closed mixed in muted trading activity. Qatar's index slipped 0.1 percent as investors booked profits after two sessions of sharp gains.

Qatar National Bank fell 0.3 percent, Masraf Al-Rayan slipped 0.6 percent and Commercial Bank of Qatar shed 0.4 percent.

Investors however, have a positive outlook for Qatar backed by strong government spending and economic indicators and are betting for a potential upgrade to emerging market status in December by index compiler MSCI. The UAE is also up for a review.

Oman's benchmark fell 0.2 percent, nearing last week's 28-month low.