The Tadawul All-Share Index (TASI) fell 1.6 percent to 7,067 points, its lowest finish since Feb. 22. The 7,000 level is considered a strong psychological technical support level where buying may come in.
"Selling pressure is back across the board as Saudi takes cues from global markets," said Muhammad Faisal Potrik, research analyst at Riyad Capital.
Brent crude slipped $1.69 to $110.57 a barrel by 1117 GMT, extending recent heavy losses, weighing on investor sentiment.
"Oil prices had run up quite a bit but in terms of petrochemical companies, margins will still be good. You won't see a major drop in those right now," Potrik added.
Most sectors ended lower as investors cut risk. Bellwether Saudi Basic Industries Corp. (SABIC) and Al-Rajhi fell 1.8 and 1.3 percent respectively, while telecoms operator Etihad Etisalat (Mobily) lost 2.3 percent.
Uncertainty over the impact of a potential Greek exit from the euro drove a rush to safety by investors on Monday, sending the single currency and European shares down to near four-month lows.
United Arab Emirates bourses also slipped and Dubai's index fell 0.4 percent to its lowest finish since Feb. 7.
"We are back in Europe to where we were in Q2 last year," said Marwan Shurrab, vice-president at Gulfmena Investments. "All the fears are again on Greece and until there is a clear stand toward a direction, global markets will be extremely volatile. It scares investors from making mature, long-term decisions ..., which is not healthy for the region."
Bellwether Emaar Properties and Dubai Islamic Bank fell 1.7 and 1.5 percent respectively, weighing on the index. Deyaar Development sheds 2.9 percent.
Contractor Arabtec bucked the trend and gained 4.7 percent, up from a near-seven week low on bargain-hunting.
Arabtec said on Monday Aabar's stake in the company is 20.8 percent, refuting a press report which cited Aabar's chairman saying the fund owns 53 percent of the company.
"Arabtec's free float is now very low with Aabar buying stake through different subsidiaries and it is easy to manipulate the move," said Samer Al-Jaouni, General Manager of Middle East Financial Brokerage Co. "Today, it is pure speculation from small traders."
Dubai's benchmark finished at 1,482 points.
"There is a bullish divergence between the index and the relative strength index (RSI) on the hourly chart, which indicates it might rebound again from these levels back toward 1,503 to 1,515," said Amjad Bakir, equity portfolio manager, head of MENA CORP. securities.
In Qatar, the measure slipped 0.6 percent to close at its lowest since Jan 29.
Heavyweight Industries Qatar dipped 1.7 percent and Barwa Real Estate shed 1.3 percent.
Elsewhere, Oman's bourse slumped to a 12-week closing low as below-expected earnings worsened the dampened sentiment from turmoil in global markets. The index fell 1.4 percent to its lowest finish since Feb. 16.
Galfar Engineering dropped 9.5 percent. It reported earnings of 1.7 million rials ($4.5 million).
"Galfar's results missed market expectations along with the fears of the global situation all together killed the market," said Adel Nasr, United Securities brokerage manager.
"Sentiment will remain negative for a while. Volumes are not supporting any technical rebound currently."
