Gulf markets slump on regional unrest

Gulf Arab stock markets slumped Tuesday and the cost of insuring Bahrain's debt surged, as investor unease with the political volatility in the tiny island nation appeared poised to grow with the declaration of a three-month state of emergency.

The declines, also fueled by fears of further trouble in earthquake and tsunami-battered Japan, reflected the continuing volatility in Mideast markets, where weeks of anti-regime protests that have swept through the Arab world are crafting daily a new political dynamic while unsettling investors.

"It's to be expected, given what's happening today in Bahrain," said John Sfakianakis, chief economist for the Riyadh, Saudi Arabia-based Banque Saudi-Fransi. "The shock waves are felt throughout the region."

The latest cause for concern came after the six-member Gulf Cooperation Council deployed a Saudi-led force to prop up the monarchy in Bahrain. The nation's king declared a state of emergency on Tuesday, giving the military sweeping authority to confront the opposition movement. Also, a Saudi official said that a Saudi sergeant was shot and killed by a protester in Bahrain's capital.

Saudi Arabia's benchmark Tadawul All Shares Index closed down 3.5 percent at almost 6,012 points, while the Dubai Financial Markets index rebounded from steeper losses earlier in the day to close 1.9 percent lower. The losses affected companies in all sectors.

Investor unease with the situation in Bahrain was reflected in the cost of insuring its debt. The five-year credit default swap for Bahrain surged by 40.88 basis points, to 347.2 basis points, according to financial data provider CMA.

Unrest in the Middle East and North Africa -- country by country

Demonstrations have spread across parts of the Middle East and North Africa. Here is the latest from each country and the roots of the unrest.

Friday developments:

BAHRAIN

Hundreds of people were injured in Bahrain Friday, when rival groups clashed over an attempted march in the town of Riffa, a residential area where the ruling Al-Khalifa family lives.

The national health ministry said 774 people were injured and 107 were hospitalized in the wake of the fighting.

Roots of unrest:

Protesters initially took to the streets of Manama to demand reform and the introduction of a constitutional monarchy. But some are now calling for the removal of the royal family, which has led the Persian Gulf state since the 18th century. Young members of the country's Shiite Muslim majority have staged protests in recent years to complain about discrimination, unemployment and corruption, issues they say the country's Sunni rulers have done little to address. The Bahrain Center for Human Rights said authorities launched a clampdown on dissent in 2010. It accused the government of torturing some human rights activists.

Kuwait police block square amid protest calls

Police barricaded a main square in Kuwait's capital Tuesday before planned protests for greater political freedoms that could bring another Gulf state into the surge for reforms around the Arab world.

The police cordons around Kuwait City's central Safat Square were a high-profile warning to demonstrators, but organizers used social media to point to alternative sites in attempts to keep a step ahead of the crackdown.

Although the calls for protests would mark the first in Kuwait since the stunning Arab uprisings, the oil-rich Gulf nation is no stranger to political showdowns. Kuwait has the region's most powerful parliament and opposition lawmakers have waged open battles against the ruling system, including nearly bringing down the prime minister two times with no-confidence votes.

One of the protest slogans: "Leave! We Deserve Better!"

The planned rallies were timed to dovetail with the return of parliament from a nearly monthlong recess.

One of the first acts was the swearing-in of the new interior minister, whose predecessor was dismissed in January following an uproar when a suspect accused of illegal liquor sales was beaten to death in police custody.

Kuwait awaits protests but no stranger to upheaval

The next scheduled stop on the Arab protest tour: Kuwait. This, however, is more of a return engagement.

Calls for anti-government rallies Tuesday are an extension of nasty political skirmishes in Kuwait that were under way long before the first glint of dissent that began in Tunisia more than two months ago.

Kuwait has the Gulf's most powerful and combative parliament, and opposition lawmakers have already taken bold shots at the ruling emir's inner circle, including twice staging no-confidence motions since December 2009 that nearly brought down the prime minister. The plan now is to take the demands for a political overhaul to the streets in the style of Egypt and nearby Bahrain.

But while the tactics may be similar, it also shows that each of the Middle East's protest movements carries its own spirit.

"There's a distinct personality to each place and each protest," said Shadi Hamid, director of research at The Brookings Doha Center in Qatar. "That's the challenge for policy makers trying to make sense of it all."