Dubai's index rose for a third session in four on Tuesday as upbeat global markets buoyed sentiment, but late selling wiped out much of its intraday gains, with short-term retail traders dominant and seeking a quick profit.

Most Middle East markets were also up as investors worldwide bought into riskier assets on hopes European leaders would agree on fresh action to tackle the region's debt crisis.

Dubai's index climbed 0.6 percent, easing away from Wednesday's 15-week low to take its 2012 gains to 10.6 percent.

'What we're seeing now is daily trading from small speculators - they are watching global and regional markets and trading based on that,' said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co. 'People prefer to do daily trading. Institutions are cautious and prefer to watch.'

Traders focused on mid-cap, liquid stocks that are easy to enter and exit.

National Central Cooling Company (Tabreed) fell 1.6 per cent and Islamic mortgage lender Tamweel dropped 0.9 per cent, while builder Arabtec rose 0.7 per cent. This trio accounted for more than a third of all shares changing hands.

In neighbouring Abu Dhabi, Aldar Properties and Sorouh Real Estate climbed 3.7 and 3.9 per cent respectively, extending gains after sources told Reuters the emirate had picked four banks to advise on a potential merger of the two state-backed developers.

The merger plan comes after property prices tumbled in the UAE from 2008 peaks. Property firms have been forced to cancel projects and restructure their huge pile of debt, while Aldar's shares are down 92 per cent from a 2008 high.

In Saudi Arabia, petrochemical and bank stocks led gains as the kingdom's benchmark rose for a third day since Saturday's three-month low.

Bellwether Saudi Basic Industries Corp (Sabic) climbed 1.1 percent, Al-Rajhi Bank rose 2.4 per cent and Yanbu petrochemical (Yansab) added 1.9 percent.

'It's mainly oil prices dictating Saudi market sentiment,' said Hesham Tuffaha, Bakheet Investment Group head of asset management.

Saudi will not cut spending even if oil prices fall, Finance Minister Ibrahim Alassaf said on Tuesday.

Oil was steady at around $92.55 at 1152 GMT, having rebounded from Friday's seven-month low.

The scope for further gains will depend on crude prices - should oil break above $100 again, Saudi's share index could head towards 8,000 points, but if prices drop below $90, it will be difficult for the benchmark to hold at current levels, Tuffaha said.

He forecast the Saudi market would rise 1-2 per cent over the next week or so.

'Most likely, oil and global markets will continue rising and that will help the Saudi market,' he added.

Oman's index climbed 2.3 percent, its largest gain in 15 months as volumes hit a five-week peak.

Oman Telecommunications and rival operator Nawras added 1.1 per cent and 3.9 per cent respectively.

Trading had slumped following the launch of Bank Nizwa's IPO last month as investors sold shares to subscribe to the offering.

'The IPO is closing today so whatever money people had left over, they're putting this back into the market,' said Joice Mathew, United Securities head of research in Muscat.