MIDEAST STOCKS-Gulf bourses retreat as bank stocks ease on Yemen, Iran war worries

By Ateeq Shariff

Oct 29 (Reuters) - Gulf bourses ended lower on Thursday as bank stocks tumbled, with an escalation of the conflict in Yemen and stalled peace efforts hitting sentiment.

Yemen's Iran-aligned Houthis attacked Aden airport on Wednesday, Yemeni government forces said. The group had earlier warned people to evacuate the facility as fighting escalated in the impoverished country.

A Saudi-led coalition fighting the Houthis said it destroyed a ballistic missile fired by the group toward the kingdom's eastern region early on Thursday, as hostilities between both sides showed no signs of abating.

Saudi Arabia's benchmark index .TASI declined 1%, with a 1.1% drop in Al Rajhi Bank 1120.SE and a 1.9% decrease in the country's biggest lender Saudi National Bank 1180.SE.

Meanwhile, oil major Saudi Aramco 2222.SE was down 0.3%.

Despite Thursday's losses, the Saudi benchmark posted a weekly gain, snapping an eight-week losing streak.

Elsewhere, Dubai's main share index .DFMGI fell 0.5%, weighed down by a 4.9% slide in budget airliner Air Arabia AIRA.DU.

Gulf stocks remained under pressure as fears of further geopolitical escalation weighed on sentiment. Reports of possible military action after the US midterm elections kept investors cautious, while disruptions to energy supply routes added to concerns, said Milad Azar Market analyst at XTB MENA.

However, progress in regional mediation and signs of US diplomatic outreach could support a rebound if a deal is reached, Azar added.

In Abu Dhabi, the index .FTFADGI lost 1.2%, with the United Arab Emirates' biggest lender First Abu Dhabi Bank FAB.AD tumbling 4.2% despite reporting a 6% rise in third-quarter net profit, driven by strong growth in net interest income.

The Qatari index .QSI fell 0.7%.

Investors were also monitoring diplomacy aimed at ending the eight-month-old conflict. Qatari mediators have presented Iran with a new draft deal to end the war with the US and Israel, an official briefed on the negotiations said.

A senior Iranian official, however, said Doha had put forward only unacceptable ideas that did not amount to an offer.

Outside the Gulf, Egypt's blue-chip index .EGX30 gained 0.6%.