Emerging markets slumped on Wednesday, as escalating unrest in the Middle East spooked investors, sending stock markets in Dubai and Saudi Arabia to multi-month and multi-year lows.

Popular uprisings that have toppled veteran rulers in Tunisia and Egypt, spread to oil-producing states Oman and Bahrain and seen violent conflict in Libya, have rattled investors' appetite for risk, with little turnaround expected in the near future.

"This is going to be a bumpy ride for the Mena region and is likely to take its toll on the rest of the world as well, particularly for oil prices," said Turker Hamzaoglu, MENA economist at BoA-ML.

"There are no countries in the region immune to the spillover from Tunisia and Egypt, we are going to have these headlines for quite a while."

Saudi Arabia's benchmark index dropped to a 22-month low, after suffering its largest decline in more than two years on Tuesday, with investors ditching stocks as online activists called for protests in the kingdom on March 11 and 20.

The cost of insuring debt in Saudi Arabia rose 9 basis points to 145 basis points, according to Markit - levels not seen since July 2009.

One-year dollar/Saudi riyal currency forwards eased slightly off 2-year highs of 75 basis points set a day earlier - a higher figure points to a weaker currency in a year's time.

Indices in Dubai and Oman also plummeted. Dubai's benchmark extended declines to hit a 6-1/2 year low, while Oman's index shed 1.5 percent, ending lower for the tenth session in 11.

The benchmark emerging equity index fell 0.4 per cent, but emerging sovereign debt narrowed 2 basis points to trade 270 bps over US Treasuries.

The Thomson Reuters emerging Europe index also lost 0.2 per cent.

Russia's index bucked the weaker trend, adding 0.7 per cent to hover at 31-month highs thanks to the high prices for oil - a key source of revenue for Russia and a key driver of the rouble's gains in recent months.

The rouble surged to a more than 2-year peak against the euro-dollar basket after the central bank widened its trading band to deter speculators and allow more room for currency appreciation that will help it battle inflation.

"A wider, stronger corridor, rouble-bullish policymaker rhetoric and high oil prices make continued rouble appreciation possible," analysts at JPMorgan said in a note, forecasting that the rouble would firm to 33.00 against the basket by mid-year, from 33.41 currently.