Al-Rajhi Bank ticked up 0.7 percent and Saudi Basic Industries Corp. (SABIC) climbed 0.8 percent. 

The market shrugged off Iran's threat to halt oil shipments through the Strait of Hormuz after sources said Saudi Arabia and other Gulf OPEC states are ready to replace Iranian oil, Reuters reported on Wednesday.

"There is room for upside in petrochemical stocks," said Hesham Abo-Jamee, at Bakheet Investment Group. "Their value will increase after geopolitical issues (in the region) are solved." 

Abo-Jamee said he expected an estimated 20 percent increase in the 2011 profit of petrochemical companies. 

Wataniya Insurance and Ace Arabia Cooperative Insurance surged 10 percent each. Al-Rajhi Takaful jumped 9 percent.

The value of Saudi traded shares exceeded SR5.28 billion on Wednesday.

The National Commercial Bank (NCB) said in its Market Review released this week that expectations of huge oil revenues and a relatively sizable budget surplus have comforted investors lately and the appetite for riskier assets increased. During the fourth quarter, Tadawul has climbed by 3.6 percent by the end of last week. The NCB report said daily trading volumes have averaged SR5.2 billion since September against 2011’s average of SR4.4 billion.

The economy has proved resilient to external shocks and is undergoing huge spending plans. This should be reflected on stock prices and investors have become more confident in the market. However, speculation is still present and driving many overweight stocks higher. The concentration on fundamental performance indicators is lacking in a very promising market that has swung back on track and is positioned to grow. The index has lost 4.4 percent YTD at the closing of last week mainly due to external factors, the NCB report said.

Dubai's index made its largest one-day gain in two months on Wednesday in what traders said appeared to be end-of-year window-dressing, as most regional markets edged higher, Reuters said. 

Dubai's benchmark climbed 2.1 percent to 1,346 points, up from Tuesday's seven-year low, supported mainly by Emaar Properties which rose 2.8 percent and heavyweight Emirates NBD which gained 3.7 percent. Illiquid stock Mashreq bank jumped 7.4 percent, in year-end sporadic trade. 

"There wasn't a major reason for the shares to drop and it wasn't due to companies' performances but investor sentiment," Reuters quoted Marie Salem, equity trader at Al-Mal Capital, as saying.    

"Investors might be taking the chance to improve closing prices without really increasing the cost, which means higher commissions and fees."   

Abu Dhabi's Aldar Properties advanced 3.7 percent, lifting from Tuesday's record low ahead of a board meeting to discuss asset sales.  

"People are starting to consider that the sale of assets isn't such a negative thing since it might be the action which stabilizes things for the company," Salem added. 

A statement issued after the close of trading showed that the Abu Dhabi government gave indebted Aldar a $4.6-billion lifeline, which included buying assets from the struggling developer and retiring a loan. 

Abu Dhabi's benchmark ended 0.6 percent higher to 2,366 points, moving sideways since slumping to a 33-month low last week. 

"UAE's real estate sector will continue to struggle next year — there are no signs of improvement," said Shakeel Sarwar, at Securities & Investment Co (SICO) in Bahrain. 

UAE markets have fallen 15-20 percent this year, as investors lack interest in companies that are mostly struggling to post growth since the property bubble burst in 2008. 

Elsewhere, Qatar's bourses ended little changed. 

Shares in Doha-listed United Development Company were temporarily suspended on Wednesday. 

After the close of trading, the firm said it recommended state-run Pension and Social Insurance Authority as a strategic shareholder through increasing the company's capital by 80 million shares, offered at 20 riyals-per-share.