UPDATE 3: Dubai's DFM ends lower for a second session in three as volumes slump.
Banks and telecoms helped Saudi Arabia's index TASI edge to a new 17-month high.
"The Saudi market traded flat amid lacklustre activity, which is a reflection of the weekend effect," said Mohammed Ishaq Ali, a fund manager at Al Rajhi Capital.
Saudi Telecom Co climbed 1.8 percent, SABB added 1.5 percent and Etihad Etisalat (Mobily) rose 1 percent.
"We think the Saudi mobile market still has growth potential despite high penetration, and expect Mobily to be the key beneficiary of demand for mobile broadband service," Al Rajhi Capital wrote in a research note.
The index climbed 0.3 percent to 6,757 points, its highest level since mid-October 2008 in its last trading session of the week. "Local investors shrugged off worries over choppy oil prices and placed bets on their long-term positive outlook of Saudi economy," added Ishaq
"The market is expected to rise further in coming weeks with the launch of first-ever ETFs which have potential of bringing fresh capital inflows into the Saudi market."
Saudi Arabia plans to launch its first exchange-traded fund of Saudi shares, which will be accessible to foreign investors, as part of efforts to open up the biggest Arab bourse.
Oil was down 1.7 percent at $80.56 a barrel at 1240 GMT.
Dubai's index DFM ended lower for a second session in three as volumes slumped, with investors cautious ahead of Dubai World's long-awaited debt restructuring offer.
Emaar Properties dropped 0.8 percent after saying it would not pay a dividend for 2009 and Dubai Financial Market fell 1.6 percent. This pair accounted for more than half of all shares changing hands on the index.
"There is only really trading on two stocks - Emaar and DFM - the rest of the market is dead," said Musa Haddad, head of MENA equity desk at National Bank of Abu Dhabi.
"From a technical point of view, I don't see the market going up much. Everyone is waiting to see what will come out of Dubai World - until then nothing will happen in the market - Dubai rallied from around 1,550 points to near 1,800, so the market has already priced in the news."
The index dropped 0.4 percent to 1,769 points. Volumes slumped to a three-week low.
Abu Dhabi's index ADI rose 0.4 percent to 2,872 points, its third gain in four days. National Bank of Abu Dhabi was the main support, rising 2.5 percent.
A late rally helped Kuwait's index rise KWSE for a third day as Zain hit a new 23-week high.
Zain climbed 1.4 percent, a day before exclusive talks with India's Bharti Airtel ended. Zain is poised to sell its African assets to Bharti in a $9 billion deal.
National Bank of Kuwait and Kuwait Finance House each added 1.7 percent.
Other lenders stumbled. Ahli United Bank dropped 2.1 percent and Bank of Kuwait and Middle East slid 1.9 percent.
The index climbed 0.2 percent to 7,465 points.
"The market continues to be very positive backed by the momentum from the Zain deal and the evident increase in liquidity on the KSE," said a Kuwaiti-based trader who asked not to be identified.
Qatar's index QSI made its largest one-day loss for three weeks as a bank-led rally waned amid falling volumes.
Commercial Bank of Qatar dropped 1.5 percent and Doha Bank slid 2 percent, while Industries Qatar fell 1.2 percent.
The index droped 0.6 percent to 7,372 points, easing from Tuesday's 23-week high.
A central bank move last week to soon allow banks to trade stocks again spurred a recent rally, with volumes also hitting a 23-week high on March 17. Wednesday's volumes are barely a quarter of this high, with the bank-driven liquidity surge proving short-lived.
"After the central bank announcement, a lot of liquidity came into the market and the market shot up, so it's normal to see some profit-taking," says Hani Girgis, assistant chief dealer at Dlala brokerage.
"Liquidity has been weak, but the market is stable. When we get the liquidity, we will get the trend."
Girgis says last week's liquidity surge came from regional and foreign investors who bought in advance of banks' return, with these players largely pursuing a buy and hold strategy, as shown by the low volumes in Wednesday's sell-off.
Bahrain's measure BAX dropped 0.04 percent to 1,532 points. (Reuters)