Dubai's stock market has dropped by more than 10%, adding to substantial losses over recent days amid fears of a faltering property market.
Two of the biggest fallers were the Gulf emirate's property giant Emaar and construction firm Arabtec.
Shares also fell heavily in several Middle East exchanges including Abu Dhabi, Egypt, Qatar and Saudi Arabia.
The Saudi slide came despite assurances from officials that the country was not exposed to the global financial crisis.
The Dubai Financial Market sank to 3,043 by mid-morning with prices of all 27 quoted shares falling. The market fell by 5.1% on Tuesday.
Foreign investors are reportedly selling interests in Dubai amid fears of weakness in the emirate's construction bonanza and a greater exposure to global markets than its Gulf neighbours.
Unwarranted falls
Saudi Arabia's stock exchange - the Middle East's largest - fell by more than 7.5%, trading below the 6,000-point mark for the first time since 2004.
Saudi central bank deputy governor Mohammed al-Jasser tried to reassure investors, saying the country had no liquidity problems and was safe from the financial crisis engulfing the US and Europe.
He said recent sharp falls on the Saudi stock market, which have hit banks, were unwarranted and bank deposits were safe.
"The situation is stable and does not require any emergency measures as if there were a problem with the banks meeting their commitments," Mr Jasser told al-Arabiya TV.
The latest declines mean Saudi bank shares have lost more than half their value since the beginning of the year.
Record falls
Egypt's Case-30 index sank another 12.5% percent within minutes of opening, after a fall of 16.47% on Tuesday.
"We're swamped here," Ahmed Hefnawi, an analyst with investment bank EFG Hermes told AFP news agency.
Kuwaiti economist Hajjaj Bukhdur said: "High tension and panic are gripping the Gulf stock markets".
"Some major portfolios and investment funds are pressurising governments to intervene by injecting liquidity," he said.
Kuwait's Central Bank cut discount interest rates by 1.25% percentage points to 4.5%, hoping to address growing concerns about financial liquidity.
But its stock exchange, the Arab world's second biggest, fell by 2.8% in the morning's trading.
Qatar's exchange meanwhile, dropped 8.3%, the biggest single-day market fall in several years in the gas-rich state.
The Tel Aviv stock exchange was closed for a Jewish holiday, having risen on Tuesday thanks to a 0.5-point cut in the base interest rate to 3.75%.
(BBC)
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