Dubai's index fell 1.8 percent to close at 1,336 points — its lowest level since June 2004.

"Liquidity has been very thin and there is no interest in the market," said Rami Sidani, Schroders Middle East head of investment. "There is no fundamental reason. People are taking risk off the table before the holidays."

Bellwether Emaar Properties fell 3.1 percent, contractor Arabtec shed 3 percent and telecoms operator du lost 2.7 percent.

Abu Dhabi's stocks were also lower, with the index declining 1.3 percent to 2,343 points, its lowest close since March 2009.

Aldar Properties fell 3.5 percent to a new record-low despite saying it had no plans to delist from the Abu Dhabi stock exchange.

First Gulf Bank dropped 2.6 percent.

"Up until earnings in Q1 next year, you'll see further volatility in the market," said an Abu Dhabi-based trader who declined to be names. "Because people are expecting the worst, any improvement could result in a relief rally." 

In Saudi Arabia, Almarai Co. hit a 10-month high after saying it had acquired Argentina farm operator Fondomonte.

The deal will help the Gulf's biggest dairy firm by market value to secure feed for its dairy herd and poultry businesses. Shares in Almarai gained 2.8 percent to reach their highest close since Feb. 21.

"Almarai's acquisition ... is a move upstream, which will allow them to both secure feed supplies and boost profit margins in the future," said Sleiman Aboulhosn, assistant fund manager at Dubai-based Al-Masah Capital. "The end result may be a noticeable improvement in the company's overall profitability."

Southern Province Cement hit an all time high, rising 5.1 percent. The firm said in a statement it expected its quarterly earnings to rise 48 percent.

The Tadawul All-Share Index (TASI) climbed 0.7 percent to 6,330.01 points — its highest close since Aug. 3.

Saudi insurance firm Allianz SF jumped 9.7 percent after saying its founding shareholder Allianz France International will merge with Allianz France.

Most petrochemical stocks also rose, with Saudi Basic Industries Corp. (SABIC) climbing 1.1 percent, the main support for the index.

Traders now believe gas subsidies to petrochemical producers will remain at current levels for the next year, having previously thought these subsidies could be cut, said Turki Fadaak, head of research at Al-Bilad Investment.

"There is talk that contracts will be extended," he said.

Saudi Hollandi Bank gained 3.2 percent. The lender said it planned a 20 percent capital increase through a bonus share issue. It also proposed a cash dividend of 1 riyal for 2011.

In Kuwait, the index ended 0.2 percent lower at 5,812 points, while bourses in Oman and Qatar ended near-flat.