Foreign investors are shedding positions in key Gulf markets considered immune to the political unrest sweeping the Middle East and local state institutions are running out of firepower to stem the slide.

Foreign investors were net sellers this week in Qatar and Oman - considered least likely to see contagion from the turmoil - and local institutions have been buying, bourse and broker data show.

Selling has been more evident in widely-held bluechip names, which are more easy to exit during crisis due to ample liquidity.

Bank Muscat, Oman's largest lender, has fallen more than nine per cent so far this week. Chemical-maker Industries Qatar fell 7pc in the last five working days.

Qatar National Bank has plunged nearly 10pc and Galfar Engineering 12pc so far in the week.

'Foreigners are shying away from regional equities. Local institutions are trying to take advantage of the drop but if events turn more negative in the Mena region, then risk aversion is bound to rise,' said one Muscat-based fund manager.

'Markets are attractive based on current valuations which is interesting local investors.'

Countries like Qatar and Oman were thought to be largely immune from the political crisis and foreign interest for stocks in the region seen higher backed by strong economic growth and increased government spending.

Qatar's benchmark was the top-performing Gulf Arab market with a 25pc gain, while Oman's index rose 6pc.

'Following the boost we saw in Qatar after the 2022 World Cup bid, foreign investors are now severely backing out,' said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

With the crisis not showing any immediate signs of abating, brokers are seeing more selling interest from foreign institutions. 'Our orders today were skewed to the sell side again - by about 80pc with a high concentration in Oman,' a Bofa-Merrill Lynch trader's note said.