Other Gulf markets, with the exception of Saudi Arabia, also ended lower as investors sold off small- and midcaps.
Stock indices in Kuwait, Egypt and Qatar fell 1.9 percent to 6,976 points, 5.1 percent to 6,756 points and 4 percent to 7,076 points respectively. while Saudi Arabia's Tadawul All-Share Index (TASI) gained 2.4 percent to 6,674.04 points.
"The reason is that there is a sentiment among investors that the local capital markets will be a copy of the international markets," said Thamel Jadallah, head of investments at Qatar-based Almana Group.
Rebounding from Saturday's overly dramatized losses, the Saudi market saw straight gains across all sectors on Sunday, with gains ranging from 0.89 percent in the Energy & Utilities sector to a gain of 3.52 percent in the Media & Publishing sector. Sunday's overall market was almost completely positive, with 134 advancing companies and only 1 decliner, the Financial Transaction House (FTH) said in its daily market commentary.
Heavyweights Industries Qatar and Qatar National Bank fell 5.3 percent and 3.1 percent.
Regional markets tracked losses worldwide and in the United States, where the main indices closed sharply lower on Friday.
"Gulf markets are affected because there is fear of a chain effect. If Greece is going down, which other countries will follow?," financial analyst Youssef Kassantini said.
In addition to the euro zone debt concerns, Egypt's bourse, was also hurt by Algeria saying it is prepared to buy up Orascom Telecom's Algerian unit.
Index heavyweight Orascom fell 4 percent, touching its steepest intra-day loss since December.
Investors are concerned the Algerian government would not pay as high a price as Orascom would have secured if a deal with South Africa's MTN had gone through.
Dubai's index opened sharply lower, but a late boost from the Saudi bourse limited its loss to 1.2 percent.
"The markets are not sold by institutions but rather by small individuals and speculators," said Samer Al-Jaouni, general manager of Middle East Financial Brokerage Co.
Low-cost carrier Air Arabia, which on Thursday posted a 51-percent drop in first-quarter net profit, fell 3.4 percent and was one of the most actively traded stocks.
"We suspect at this stage that the company may have largely missed due to variances below its operating line, and therefore this does not overly concern us," EFG Hermes said.
"Traditionally, the first quarter has been the carrier's weakest quarter, and we would expect a pickup as we go through the year, in particular as the company's peak season is in (the summer)," it added in a research note.
Abu Dhabi's index declined 1.4 percent to 2,752 points, led by real estate and cement companies.
Bourses in Oman and Bahrain dropped 1.1 percent to 6,727 points and 1 percent to 1,541 points respectively.
Bank Muscat fell 3.3 percent. The bank denied a report that it was about to sell foreign assets.
- With input from agencies
