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.

'Catastrophe'

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."

Ahmad Shahin, an equity strategist at investment bank Shuaa Capital, said: "It's way behind logical.

"We've reached a stage where we are just sitting down watching and hoping that people realise that our markets are extremely well valued."

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