Investors are likely to rethink their equity strategy this week as tensions in parts of the Mena region push oil prices higher.
Protests in Bahrain, Yemen and Iran have raised concern about instability in an area that holds about 60 per cent of global oil reserves. Confusion also surrounds the reopening of Egypt's stock exchange.
London crude prices extended gains last week to hold at two-and-a-half-year highs of more than US$104 a barrel, as fresh Israel-Iran tension stoked fears of a disruption to oil flows in the region.
But Amrita Sen, an energy analyst at Barclays Capital, said although the political situation in some Mena region countries could support a further rise in the price of oil this week, "oil infrastructure is fairly shielded from the population".
"There have been years of civil war in some of these countries but there is no lasting effect on infrastructure, which would put pressure on supply and demand," said Ms Sen.
The cost of insuring Bahrain's debt against default is at a new 18-month high and stood at 268.11 basis points.
But the country's benchmark index the BB All Share Index gained 0.6 per cent to 1,475.10, making it the only index in the GCC to end the week positively.
Although tensions may have acted as a catalyst for foreign investors to withdraw further cash from the Mena region, some fund managers said the impact of Bahrain's market, one of the smallest in the region, was minimal.
"Bahrain is a very small market, and almost non-existent," said Sebastien Henin, the Mena portfolio manager at The National Investor in Abu Dhabi.
"Even though it's not good for sentiment, unfortunately the view on the region is already negative and it's already priced into the market."
Just 79,050 shares were traded on Thursday in Bahrain. Qatar's measure, which was the only other regional stock market open on Thursday, fell to its lowest point this year.
The country's QE Index declined 1.3 per cent to 8,703.07.
Stock markets across the Gulf and Middle East fell sharply at the end of last month as Egypt was engulfed in mass protests that ended former president Hosni Mubarak's 30-year rule.
They have since rebounded and recouped much of those losses, although Kuwait ended the week at a seven-month low, losing 1.4 per cent to 6,559.50 points and Saudi Arabia's Tadawul All-Share Index suffered its largest decline in two weeks on Wednesday as it lost 1.8 per cent to 6,486.83 points. It closed 1.5 per cent down yesterday at 6,383.88.
Egypt's bourse has postponed reopening for a third time, saying it would not open today as planned. It will remain closed until banks are functioning properly, officials say. The exchange has been shut since January 27 after it fell to two-year lows.
The UAE equity market remains pegged by the property downturn.
Last week, shares in two developers, Union Properties and Sorouh Real Estate, retreated to all-time lows after reporting quarterly losses. The Dubai Financial Market General Index lost 1.3 per cent to end the week at 1,594.87 points, while the Abu Dhabi Securities Exchange General Index slipped 1.2 per cent to 2,683.97 points.
But Mr Henin said the recent unrest in parts of the Mena region could benefit Dubai.
"Most of these international corporations in Bahrain and other Gulf countries are considering coming to Dubai if they have to leave," he said.
There have been reports of business tycoons from the wider region coming to the UAE as unrest grows in their respective countries.
"It shows Dubai is a place of safety," said Mr Henin.