DUBAI—Persian Gulf stock markets tumbled again Monday, hitting multi-month lows, as fast-spreading unrest in the Arab world threatened to disrupt the region’s oil monarchies.

“Investors are now pricing in bigger political risk premiums as unrest spreads in the region. There was evidence of more foreign selling today,” said an equities trader in Dubai at investment bank UBS.

Oil producer Oman, which isn’t a member of the Organization of Petroleum Exporting Countries, was the latest flashpoint, as rising political unrest in the Middle East and North Africa raised strong concerns about Saudi Arabia and other regional hydrocarbon producers. The situation was tense in the normally placid Gulf Cooperation Council member state after the Omani police reportedly shot dead two demonstrators on Sunday.

Tensions between Bahrain’s ruling family and antigovernment protesters also have increased markedly after a week of relative calm. Further west, the situation in Libya remained volatile, with rebels taking control of a city near the capital of Tripoli.

“Large-scale protests in Bahrain added to concerns that major oil-producing nations in the Persian Gulf could be the next affected. The biggest fear of course is for Bahrain’s neighbor and the world’s largest producer: Saudi Arabia,” said one Credit Suisse Group analyst.

While crude-oil prices stabilized Monday after sharp recent increases on concerns about supply disruptions in Libya, the market remained on edge because of the situation in Oman. By early afternoon in Europe, the price of the crude-oil futures contract for April delivery on the New York Mercantile Exchange was up a penny at $97.89 a barrel.

Looking at equities, Muscat Securities Market’s benchmark MSM 30 Index plunged 4.9% to 6142.42, a seven-month low. Several stocks ended at their lowest daily trading limits amid reports of mounting tensions in the sultanate despite the ruler taking steps to appease the protestors.

Stocks listed on Dubai’s market hit a near seven-year low, sagging 3.8% to 1410.70—the benchmark index’s lowest close since June 2004. Qatar Exchange’s main QE Index retreated 3.2% to 7932.84, a four-month low.

Abu Dhabi’s main gauge of stocks fell 1.5% to 2588.9, and Bahraini shares slipped 0.4% to 1430.77. Saudi Arabia’s Tadawul stock market, the region’s largest, fell 0.2% to 5941.63, after falling 5% Sunday.

“Markets could well be facing a further bout of political-risk-dominated weakness as the spread of revolutionary pressures continues to broaden and deepen across the region,” a Nomura analyst noted.

Bank Muscat plunged 8.8% to 0.783 Omani rial; Dubai bellwether Emaar Properties fell 6.3% to 2.67 dirhams; Doha Bank shed 9.9% to 51.80 riyals and Abu Dhabi real-estate heavyweight Aldar sank 7.2% at 1.38 dirhams.