By Dylan Bowman and Reuters
UPDATE 7: Oman, Qatar, Abu Dhabi all close up but Dubai and Saudi are down.
Most Gulf markets climbed on Wednesday after suffering heavy losses over the past few days, taking a cue from a rise in global stocks.
But Kuwait's index fell slightly on the day after the government said it would step in to help troubled Gulf Bank. Kuwait Finance House rose 1.12 percent, while Global Investment House declined 4.17 percent.
The benchmark closed down 0.09 percent at 9,676 points after falling more than 1 percent during trading. Earlier, the index was down 2.51 percent to 9,442 points, its lowest since December 2006.
The government said on Tuesday it was ready to buy into a capital increase by the lender, which faces derivatives losses, if the bank's shareholders failed to secure the funds.
"The Gulf Bank issue is going to linger for a while as it's the first of its kind during the crisis and it had a very strong negtive impact on the entire market, especially during times of uncertainty," said Rami Sidani, head of MENA investment at Schroders Investment Management.
"Once the government makes clear the process that they're going to follow (through), we're going to see an improvement in sentiment."
Emaar Properties pulled Dubai's main index to a lower close as uncertainty over the economic outlook dented investor sentiment.
Abu Dhabi gained however, taking its cue from rising global markets.
Emaar fell 1.52 percent, dragging the index down 0.51 percent to 2,917 points.
Abu Dhabi's benchmark ended up 2.2 percent at 3,350 points, helped by Abu Dhabi National Bank, which climbed 5.5 percent.
"Although there is some positive sentiment from global markets, there was some selling pressure because confidence has not been completely restored," said Samer al-Jaouni, general manager at Middle East Financial Brokerage.
"Even the market rise that we saw today will not last long as it was a technical rebound."
Bank Muscat and National Bank of Oman (NBO) led Oman's index to close higher, taking cue from rising gobal markets.
Bank Muscat and NBO jumped 7.38 percent and 3.59 percent respectively, pushing the index up 2.38 percent to 6,119 points.
"The global markets saw stability and this has reflected on the markets in the region. Our markets will continue to follow global markets," said Adel Nasr, broker at United Securities.
Qatar's main index closed up more than 5 percent, led by Industries Qatar. Industires Qatar and Qatar Gas Transport Co surged 5.75 percent and 5.43 percent respectively. The benchmark ended up 5.14 percent at 6,766 points.
Saudi Arabia's main index fell more than 1 percent, led by Saudi Basic Industries Corp, reversing earlier gains.
SABIC and Al-Rajhi Bank dropped 4.98 percent and 2.25 percent respectively, dragging the benchmark down 1.5 percent to 5,537 points.
Analysts predicted Gulf markets would rebound on Wednesday, tracking a rise in Asian stocks on hopes the Bank of Japan and the Federal Reserve will cut interest rates, despite lingering fears of a recession.
Most Gulf Arab markets fell on Tuesday as worries of global economic slowdown dented investor confidence, while Saudi Arabia's index bucked the downtrend on talk of a possible bank merger.