Saudi Arabia's market dropped by seven per cent while Egypt suffered the largest percentage loss, by more than 16 per cent, to its lowest level in two years.

In all, the seven Arab stock markets in the Gulf have shed about $150bn in value over the past three days to around $800 billion.

Reassurances

A number of finance officials attempted to reassure investors.

Ahmed Bin Adbul Nabi, the finance minister of Oman, where the market closed 7.29 per cent lower, said that the sultanate had not been affected by the world financial crisis and that the fall was temporary.

The drop was the largest on the Omani market since January.

Ahmed Baqir, the Kuwaiti commerce and industry minister, also described the plunge in stocks as temporary.

But Abdulwahab Abu-Dahesh, a Saudi economist, said: "It is a catastrophe.

"It is clear that we will remain volatile and unpredictable as long as global markets remain impacted by the financial turmoil."

Ali al-Nimesh, a Kuwaiti economist, said: "We are a part of this world and are impacted psychologically and practically by what is happening in global markets."

However, Israel's bourse shot up after the Bank of Israel cut its base rate.