Kuwait's Zain hit a month-high on Sunday after receiving a new bid for a stake in its Saudi unit, while Gulf Arab stocks rose as investor fears unrest would spread to top oil exporter Saudi Arabia eased.
-- Dubai in biggest gain since 2009
Dubai's index made its largest gain in 15 months, Saudi Arabia edged up to a three-week high and Qatar rose for a fifth session, but analysts were cautious, warning a likely weaker opening in Asia on Monday following Japan's devastating earthquake would spark regional profit taking.
Telecoms operator Zain climbed 4.4 percent and affiliate Zain Saudi rose 9.2 percent.
Kingdom Holding, up 6.9 percent, and Bahrain Telecomm have a made a joint bid for a quarter-stake in Zain Saudi after parent Zain earlier rejected individual offers from the two firms.
UAE Etisalat's $12 billion take-over offer of Zain depends on the latter selling its Zain Saudi holding, with Etisalat active in the kingdom through unit Mobily.
"Agreeing a deal for Zain Saudi would be a major milestone towards facilitating the Zain-Etisalat deal," said Simon Simonian, Shuaa Capital telecoms analyst.
Etisalat climbed 0.9 percent, while Batelco ended flat.
"Zain is a good asset and a great strategic fit for Etisalat so I don't think Etisalat will give up easily," said Irfan Ellam, Vice President, and Al Mal Capital telecoms analyst.
Zain shareholder, the Kharafi group, has led the Etisalat deal and other Kharafi stocks also surged, with Kuwait Food Co climbing 6.9 percent and National Investments Co adding 8.5 percent.
Kuwait's index climbed 1.8 percent and Dubai's rose 4.3 percent, its biggest gain since December 14, 2009, as both benchmarks rally from the six-year lows of early March.
Emaar Properties and Arabtec added 10.1 and 7.3 percent respectively, with this pair accounting for more than a third of Dubai trade, while in Abu Dhabi, Dana Gas gained 3.3 percent
"There's a relief rally," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.
"Once things have settled down, we will see a lot more individual stocks gain, namely Emaar, Arabtec and Dana Gas."
Stocks had tumbled on fears unrest would gain hold in Saudi Arabia following deadly protests in Bahrain and Oman, but with a security clampdown in Riyadh stymieing a planned day of rage on Friday, regional sentiment is more upbeat.
Dubai Islamic Bank rose 2.8 percent after its fourth-quarter profit fell 62 percent, but beat analysts' forecasts.
"We rate the stock neutral, as DIB is most exposed to the real estate sector of all UAE banks, and its relatively high valuation," Jaap Meijer, AlembicHC senior analyst wrote in a research note.
UAE property prices are seen making further double-digit declines.
Qatar's measure climbed 2.8 percent. "People are putting cash back to work," added EFG's Wakeman. "It seems from the buying activity that (Qatar) is where a lot of international cash will return." Qatar's economy is forecast to again achieve double-digit growth in 2011, dwarfing growth rates in neighbouring countries.
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