Central bank Gov. Sheikh Salem Abdul-Aziz Al-Sabah said Kuwait's economy was witnessing an imbalance which could lead to many risks, according to state news agency KUNA. The benchmark fell 1.6 percent to 5,973 points, after slumping to its lowest close since September 2004 on Sunday.
Investor sentiment has been negative recently following new regulations announced by the Capital Market Authority (CMA). Market participants are given until September to implement the by-laws announced in March.
"There are many issues affecting the Kuwait market. One is the CMA laws that create conflict through their application," said Safaa Zbib, head of research at Kuwait and Middle East Financial Investment Co.
"The government seems very pessimistic about the economy. And a lack of lending is crippling the banking sector."
Kuwait Finance House dropped 5.2 percent to a year low after posting a 43 percent fall in quarterly net profit.
Logistics firm Agility tumbled to a fresh 12-month low, falling 3.2 percent as it extended declines, following an adverse US court ruling on fraud charges.
In Egypt, the benchmark fell 1.7 percent to 5,175 points, a day after the appointment of a new finance minister boosted the index.
Worries persist over whether Egypt can make a peaceful transition from military to civilian rule after elections planned later this year, dampening appetite for shares.
"Today, the foreigners are more on the sell side," said Mohamed Radwan of Pharos Securities. "The political situation is still putting pressure on the market ... We're still seeing protesters on the streets, we still see criticism of the new cabinet candidates. It's not all over yet."
Saudi shares slipped 0.56 percent to a four-week low, taking cues from declining oil prices and global markets. The Tadawul All-Share Index (TASI) closed at 6,423.29 points.
"Today's sell-off is a continuation of yesterday's reaction to euro debt and events unfolding in the US," said Asim Bukhtiar, Riyad Capital head of research.
"Also, we're nearing the end of earnings season and investors are locking in gains ahead of Ramadan. Market activity is going to slow down significantly."
Bellwether Saudi Basic Industries Corp. (SABIC) slipped 0.5 percent. It said on Sunday maintaining profitability would be a tough challenge after posting a record profit in the second quarter.
Bank AlJazira dropped 6.6 percent despite its second-quarter profit nearly tripled.
The stock had gained 5.3 percent over the previous month, but Monday's fall left it at a four-month low.
UAE telecoms operator Etisalat shed 1.4 percent, dragging Abu Dhabi's index 0.9 percent lower at 2,707 points after quarterly earnings missed forecasts. The Dubai index retreated 0.8 percent to 1,533 points.
Bourses in Qatar and Oman also ended low, tracking losses in global markets. The Qatari benchmark fell 0.5 percent to 8,441 points. The Omani index eased 0.03 percent to 5,980 points.
The Bahraini measure gained 0.1 percent to 1,318 points.
