Kuwait's benchmark rose 0.4 percent higher, its biggest gain since Oct. 16 to trim its 2011 losses to 16.1 percent.   

The country's ruler named outgoing Defence Minister Sheikh Jaber Al-Mubarak Al-Sabah as new prime minister on Wednesday after the government resigned.

"All eyes are on the political situation and so investors are cautious," said a Kuwait trader.

"High-net-worth investors and institutions don't want to play the market because there's not enough liquidity to be able to easily enter and exit with large positions." 

An average of 156 million shares have traded daily on the Kuwait index in 2011, down from 305 million in 2010.  

National Bank of Kuwait climbed 1.8 percent, while telecoms operator Zain and Islamic lender Kuwait Finance House each added 1.1 percent.  

"The market is spiraling into its own demise, with the political arena continuing to be unstable and the economy failing to achieve significant growth outside the oil sector," said the trader.    

"The plans for the economy and the country are on hold due to the political situation and the stock market is suffering because the new regulator is not up and running properly yet.   

"Meanwhile, liquidity has plunged and society's interest in the market has dropped significantly."   

The Capital Markets Authority was launched in March, more than 30 years after the Kuwait Stock Exchange was established, but investors are confused over its powers.

Qatar's index rose for a third day in four, climbing 0.8 percent as volumes hit an eight-session high.    

"There's more liquidity coming into the market today — some people are speculating on Qatar getting upgraded by MSCI," said a Doha-based trader who asked not to be identified.    

"Now is also a good time to buy for those who want to take positions ahead of Q4 results." 

Qatar, along with the UAE, will find out in December if influential index compiler MSCI has upgraded them to emerging market status from frontier market, having delayed its decision from June.

Oman's index rose 1 percent, its largest gain since Aug. 28. It is up in three of four trading sessions since Nov. 23's 28-month low.  

Oman Telecommunications Co climbed 1 percent and   Renaissance Services gained 1.7 percent.   

National Bank of Oman (NBO) and Bank Muscat added 0.7 and 2.3 percent respectively.   

"Oman followed global markets' movement and we saw strong buying from local asset managers and Gulf institutions on Bank Muscat, Renaissance, Omantel and NBO," said Adel Nasr, United Securities brokerage manager.   

"If global markets retreat over the weekend, we would expect Oman to also go down on Sunday."   

World stocks started the final month of the year on a positive note on Thursday as coordinated liquidity action by the major central banks raised hopes policymakers may take more drastic action to stem the euro zone debt crisis.