Saudi Arabian stocks closed higher on Monday after sliding on the previous day following assurance by oil producer Aramco that there will be no supply shortage as a result of Saturday's attack on its facilities.
In Abu Dhabi, the index rose 1.7 per cent boosted by a two jump by First Abu Dhabi Bank and a 2.6 per cent by Emirates Telecommunications Group.
"In terms of fundamentals, certain high quality companies across Mena are currently being undervalued and investors are gradually adding to their exposure," said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital.
In Dubai, the index was up 0.3 per cent with the market heavyweight lender Emirates NBD gaining 0.8 per cent. Other major Gulf markets also rose as cheaper valuations attracted the investors.
After losing 1.1 per cent on Sunday, Saudi stock market index closed one per cent with its biggest lender National Commercial Bank surging 4.2 per cent and Al Rajhi Bank rising 1.4 per cent.
Analysts said Saudi stocks were supported by domestic funds and regional investors, as most foreign active investors have already exited the index, which is trading roughly flat year-to-date after it rose as much as 20 per cent at its peak in May.
Capital Economics analysts said Saudi oil attacks add to headwinds for world economy but unlikely to be a disaster as production is expected to resume quite quickly and even if it doesn't, the implications for oil prices and developed economy inflation should be limited. "But growing tensions in the Middle East are another headwind for the global economy in already uncertain times, and a full-blown conflict could trigger another leg in the global downturn."
Despite Aramco's assurance, concerns remain over oil supply which could be disrupted if the outage continued for long. It could also have a wider impact on Saudi Aramco's planned initial public offering.
In Bahrain, the index fell 0.7 per cent; Oman index slipped 0.3 per cent and Kuwait index declined 2.2 per cent. Outside the Gulf, Egypt's blue-chip index was down 0.4 per cent.