MIDEAST STOCKS-GCC security discord with Qatar pummels shares, region mixed
* Relief from Russia-Ukraine easing short-lived
* Surprise move against Qatar scares retail investors
* Qatar's index posts biggest drop in more than 6 months
By Nadia Saleem
DUBAI, March 5 (Reuters) - Qatar's shares led a decline in most Gulf markets on Wednesday after Saudi Arabia, the United Arab Emirates and Bahrain said they would withdraw envoys from Doha over what they called interference in their internal affairs.
The move, conveyed in a joint statement by the three countries, is unprecedented in the three-decade history of the Gulf Cooperation Council, a pro-Western alliance of Saudi Arabia, Bahrain, Kuwait, Qatar, the UAE and Oman.
Most Gulf markets reversed early-session gains driven by relief over Ukraine before Gulf tension hit investors sentiment.
"It's a diplomatic agreement at this stage to show a dissatisfaction with polices - I don't see a threat to commercial or economic ties between the GCC at this moment," said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital.
Doha's measure dropped 2.1 percent in its biggest one-day loss in more than six months. Non-Qatari investors were net sellers as well as Qatari individual investors.
"It's retail-driven panic selling, it's too early to say if this would have an impact on fund allocations for institutional investors, because we don't know how the situation will evolve," said Ali Adou, portfolio manager at The National Investor.
Telecommunications firm Ooredoo was hit the worst; the stock nosedived 7.0 percent after the company posted a 36 percent drop in fourth-quarter net profit and missed two analysts' estimates.
Saudi Arabia's share index was choppy but managed to close in the black, up 0.1 percent.
The selling spread to the United Arab Emirates, where Dubai's measure slipped 0.5 percent. Small-cap shares suffered the most, while blue chips were steady. Abu Dhabi banks helped support the emirate's benchmark, which ticked up 0.4 percent after a volatile session.
"Investors are of two minds on whether this is a short-term pullback or will this continue," said Sanyalaksna Manibhandu, senior analyst at NBAD Securities. "People are not rushing to sell key stocks. I would suggest this is an over-reaction based on the GCC being a fairly united unit for a few years."
Shares in RAK Ceramics gained 2.8 percent after a source told Reuters that its top shareholder, the ruling family of Ras Al Khaimah, was exploring a possible sale of all or part of its stake in the firm.
In Egypt, investor sentiment was buoyed after army chief Field Marshal Abdel Fattah al-Sisi, widely expected to win the presidency of the Arab world's most populous country, gave his clearest signal yet that he would run for president.
He could not ignore the demands of the "majority", he said late on Tuesday.
Cairo's benchmark index rose 1.1 percent, taking year-to-date gains to 18.3 percent.
* The index tumbled 2.1 percent to 11,347 points.
* The index gained 0.1 percent to 9,161 points.
* The index slipped 0.5 percent to 4,101 points.
* The index climbed 0.4 percent to 4,938 points.
* The index rose 1.2 percent to 8,025 points.
* The index retreated 0.7 percent to 7,477 points.
* The index gained 0.5 percent to 7,129 points.
* The index slipped 0.2 percent to 1,365 points.
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