By Mohd Edrees

Dec 29 (Reuters) - UAE stock markets closed higher on the last trading day of 2023, with the Dubai index rising for a third year on expectations for interest rate cuts in 2024.

Dubai's benchmark index .DFMGI gained 0.3% on Friday, lifted by a 1.3% rise in toll operator Salik Company SALIK.DU, while top lender Emirates NBD Bank increased 0.9%.

The Dubai index, which hit its highest in nearly eight years in early October, finished the year 21.8% higher.

It was supported by gains in heavyweight real estate and banking sectors in 2023, as blue-chip developer Emaar Properties EMAR.DU ended the year up 35.2% and Emirates NBD 33.1% higher.

The Dubai market gained strongly during the first half of the year, but steadied and then retreated in reaction to the flare-up in geopolitical tensions in the region, said Abdelhadi Laabi, chief marketing officer at KAMA Capital. However, "the market was able to recover a significant part of its losses, returning to an uptrend".

Abu Dhabi's main index .FTFADGI edged up 0.1% in a volatile session on Friday, supported by a 4.8% surge in state-run utility Abu Dhabi National Energy Company TAQA.AD and a 2.2% jump in conglomerate International Holding Company (IHC) IHC.AD.

The Abu Dhabi index fell 6.2% for the year, breaking a two-year winning streak, with the first quarter seeing the highest losses for nine years, according to LSEG data.

IHC, the UAE's most valuable listed firm, fell 2.6%, its first annual loss in five years, while top lender First Abu Dhabi Bank dropped FAB.AD 18.4%, extending losses to second year.

"The Abu Dhabi stock market was more volatile than its (Dubai) counterpart and was affected by the uncertainty and rapid changes in the oil markets' conditions," Abdelhadi said.

Expectations for softer U.S. monetary policy could fuel risk appetite, lower financing costs and boost UAE stocks in 2024, Abdelhadi added.

Monetary policy in the six-member Gulf Cooperation Council is usually guided by the U.S. Federal Reserve's decisions, as most regional currencies are pegged to the dollar.

Oil prices - a key contributor to Gulf economies - ended 2023 about 10% lower after two years of gains, as geopolitical concerns, production cuts and central bank measures to rein in inflation triggered big fluctuations in prices. O/R

On Friday, Brent crude LCOC1 was up 0.7% to $77.67 a barrel at 1203 GMT

(Reporting by Mohammad Edrees
Editing by Mark Potter)

((Mohammad.Edrees@thomsonreuters.com;))