Gulf Arab stocks plunged on Thursday as weaker oil prices and tensions with Iran compounded a broad selloff in emerging markets, sending some indices down as much as 4 percent and erasing all the gains of 2008.

Oman's blue chip index <.MSI> closed 3.88 per cent lower, falling 27 per cent from its lifetime high set in June.

Investors selling broad emerging markets portfolios have been forced to offload Gulf shares as well, even though oil revenues assure sustainable growth in the region, said Yazan Abdeen, fund manager at ING Investment Management in Dubai.

'The only reason for the fall in the market is that all this bad news globally is contagious. The local investor has taken refuge by not investing, taking out liquidity, while there is at the same time a seller,' Abdeen said.

Qatar's main index <.QSI> closed 2 per cent lower. The Doha benchmark has fallen 23 per cent since reaching a 2-1/2-year high on June 11, meaning that it now joins the markets of Oman, Dubai and Saudi Arabia in bear territory.

Kuwait's index <.KWSE> closed 0.86 per cent lower, having fallen 11 per cent since reaching an all-time high on June 25.

'This is a much needed correction that market makers can no longer postpone,' said Naser al-Nafisi, general manager at al-Joman Center for Economic Consultancy.

Restrictions on consumer loans introduced by Kuwait's central bank in March and the recent fall in oil prices have had a negative effect on investor sentiment, he said.

Analysts said that local support is likely to return at the end of September, when the Muslim fasting month of Ramadan ends and many investors return to the market.-Reuters