Saudi Arabia, the region's biggest stock market, ended down 0.2 percent. The index's two biggest market movers, Al-Rajhi Bank and petrochemicals giant SABIC , both shed 0.5 percent.

Riyad Bank and Saudi British Bank (SABB) also closed down 1.1 percent and 1.6 percent respectively.

Investors have been cautious about valuations for top companies in the Saudi market in recent months after a near 15 percent rise in the index this year.

"Valuations for the market as a whole are not exciting," said Vrajesh Bhandari, a portfolio manager at Dubai-based Al Mal Capital. "Having said that, multiples can expand further."

Banks have also reported lower deposits in their second-quarter earnings, released over the past couple of weeks, although with demand for loans also low there is little risk of a funding shortage.

The Dubai index likewise closed down 0.3 percent, led by a 1 percent drop in Dubai Islamic Bank, but Abu Dhabi's market rebounded to end up 0.3 percent after dipping in early trade.

Fund managers' confidence in stock markets in the United Arab Emirates is returning after being damaged by the planned liquidation of Dubai-based private equity firm Abraaj, a monthly Reuters poll showed on Tuesday.

Qatar's index closed up 1.9 percent, continuing to rebound from early losses on Monday after telecommunications firm Ooredoo reported a 60 percent decline in second-quarter net profit.

Weakness in the banking sector pulled Kuwait's index down 1.3 percent, with Kuwait Finance House dropping 2.4 percent.

The stock is still up 14 percent this year, but has given up some gains in recent days as its merger talks with rival Bahraini lender Ahli United Bank pick up pace.