The Saudi benchmark index plummeted nearly 10 percent in early trading, with banking stocks and petrochemicals the hardest hit.

Al Rajhi Bank, Samba Financial Group and Banque Saudi Fransi plunged 9.4 percent, 9.6 percent and 9.7 percent respectively.

Shares in Saudi Basic Industries Corp (Sabic) and Saudi Fertiliser both declined 9.9 percent.

The index fell 9.75 percent to 6,730 points.

Qatar's main index fell more than 4 percent as an ongoing foreign sell-off intensifies on worries about the health of the global economy.

"Foreign institutions are heavily selling in the market. Some of them are exiting completely," says Amro Motasim, chief trader at Ahli Bank.

"One of the reasons for the sell-off is the turmoil in the United States and possibly now Europe," he says.

Qatar Industries fell 3.88 percent, recovering from earlier losses that saw shares decline more than 7 percent.

Qatar National Bank fell 3.5 percent.

The Bahrain index fell 0.64 percent to 2,438 points.

Shares in Dubai construction firm Arabtec fell more than 7 percent as investors worry construction firms will be among the worst hit by the emirate's real estate woes.

"The main issue is that investors are a little bit worried about contractors collecting the money from developers," says Alfred Fayek, director of the GCC institutional desk team at EFG-Hermes.

"If the real estate sector is struggling, contractors will be amongst the biggest losers," he says.

Earlier in the session, Arabtec shares were down by as much as 14 percent. Union Properties and Emaar Properties fell 4.3 percent and 1.18 percent respectively.

The Dubai index declined 2.86 percent to 3,734 points.

In Abu Dhabi, the index fell 3.99 percent to 3,619 points. Aldar Properties and Sorouh Real Estate both declined more than 8 percent.

Kuwait's main index fell more than 2 percent in early trade, led lower by banks and telecoms.

Shares in Mobile Telecommunications Co (Zain) declined 7.35 percent, while Gulf Bank and National Bank of Kuwait fell 5.08 percent and 3.49 percent respectively. The benchmark fell 2.21 percent to 12,107 points. -Reuters