From Atiq Sharif

March 9 (Reuters) - Most Gulf stock markets declined at the close of trading on Monday, with Dubai suffering sharp losses, amid the ongoing US-Israeli war on Iran and a surge in oil prices of more than 11 percent due to supply cuts and fears of prolonged disruptions to shipping through the Strait of Hormuz.

US President Donald Trump said on Saturday that he was not interested in negotiating with Tehran, adding that a war with Iran would only end when the country had no effective army and no leadership left in power.

Adding to the fading hopes for peace, Iran today chose Mojtaba Khamenei as Supreme Leader to succeed his father, Ali Khamenei, signaling that hardline conservatives will remain in control of power.

There is particular concern in energy markets about the tension surrounding the Strait of Hormuz, through which approximately one-fifth of the world's oil supply usually passes.

* Increased credit default swaps

Dubai’s main index recovered some of its earlier losses to close down 2.8 percent, with Emaar Properties shares falling 4.7 percent and Salik toll company shares declining 4.9 percent.

The index, which resumed trading on Wednesday after a two-day suspension, fell by more than 11 percent in four sessions, bringing its losses since the beginning of the year to about five percent.

Air Arabia's stock fell five percent.

In Abu Dhabi, the index fell 0.4 percent, extending its losses for the sixth consecutive session, impacted by a 4.9 percent drop in Abu Dhabi Commercial Bank shares.

Last week, the Dubai and Abu Dhabi stock exchanges temporarily set a minimum limit for the decline in securities prices at five percent.

The cost of insuring against default on sovereign debt issued by several countries in the region saw a sharp rise again on Monday.

Data from Standard & Poor's Global Market Intelligence showed that Bahrain's five-year credit default swaps (CDS) rose 23 basis points from Friday's close to 281 basis points, their highest level in more than three years. CDS in Egypt rose 12 basis points, while Saudi Arabia, Qatar, Abu Dhabi, and Dubai each saw a four-basis-point increase.

The Saudi benchmark index fell 1.6 percent, ending a five-day winning streak, with Al Rajhi Bank shares dropping 3.9 percent and shares of National Bank of Saudi Arabia, the region's largest bank by assets, falling 4.5 percent.

Shares of low-cost carrier Flynas fell 4.4 percent, but Saudi Aramco shares rose 0.7 percent ahead of its annual earnings report due on Tuesday.

Junaid Ansari of Kamco Invest predicted that investors would gravitate towards sectors less exposed to regional tensions. He said Saudi Arabia remains relatively attractive, with the Saudi Tadawul All Share Index (TASI) and Oman's MSM30 Index being the only two markets to have remained in positive territory since the start of the crisis, supported by Saudi Arabia's lower direct exposure and the gains made by Aramco shares.

George Pavel, general manager of Naga.com Middle East, said that Saudi Arabia's efforts to divert crude oil exports through Yanbu have eased concerns about disruptions in the Strait of Hormuz. He added that the market could benefit further if oil prices remain high and domestic sentiment remains strong.

The index in Qatar fell 2.6 percent, with almost all listed stocks declining, including Qatar National Bank, the largest Gulf bank by assets, which dropped 2.7 percent.

The index fell 1.4 percent in Bahrain, and dropped 0.5 percent in Kuwait, while it rose 3.1 percent in Oman.

Outside the Gulf region, the Egyptian stock market index lost 0.8 percent, continuing its decline from the previous session.