Qatar's state-owned Qatar Airways had its operating license in Saudi Arabia withdrawn on Tuesday, as the tiny gas-rich nation continued to face an economic blockade over accusations that it supports terrorist groups in the region.

"The General Authority of Civil Aviation has decided to cancel all licenses granted to Qatar Airways and to close all of its offices in the kingdom within 48 hours," the official Saudi SPA news agency cited the regulator as saying.

The measure is the latest blow to Qatar, whose neighbors - Saudi Arabia, Egypt, the United Arab Emirates (UAE) and Bahrain - cut air, sea and land links with the Gulf state on Monday. Yemen, Libya's eastern-based government and the Maldives followed suit later in the day.

Some commercial banks in Saudi Arabia and the United Arab Emirates (UAE) said Tuesday they had halted business with Qatar. Banking sources told the Reuters news agency that they were delaying the issuing of letters of credit with Qatari banks due to the diplomatic rift.

Riyal under pressure

Saudi media also said the country's central bank had also asked local banks to sell Qatar's currency, the Riyal, and not to buy anymore of it.

Several Gulf ports have stopped Qatari registered vessels or those heading to the peninsula from docking.

Although Qatar has vehemently denied accusations that it is funding terrorist groups, the Doha government insisted it would not retaliate against the measures.

But still, Qatar Airways suspended all its flights to Saudi, the UAE, Bahrain and Egypt hours after the diplomatic boycott got underway.

Qatar's foreign minister said Tuesday that the country was ready for mediation efforts to resolve the crisis, as Kuwait stepped in help diffuse regional tensions. Kuwait's emir Sheikh Sabah Al-Ahmad Al-Jaber al-Sabah was due to travel to Riyadh later in the day to meet Saudi King Salman.

Blockade hits trade

Several companies confirmed their operations were being hit by the rift, including Norway's Norsk Hydro, which part-owns the aluminum producer Qatalum, with the state-owned Qatar Petroleum.

"Most Qatalum shipments normally go through the large Jebel Ali port in (the) UAE, but this port looks to be closed for all Qatar shipments from Tuesday morning," Norsk Hydro said. The firm said it was looking into the possibility of shipping directly from Qatar or using an alternative regional hub.

The Doha-based news channel Al-Jazeera reported trucks carrying food from Saudi Arabia were stranded on the Saudi side of the Qatar border due to the rift. Local supermarkets described residents stocking up on emergency supplies over fears of food shortages.

The spat also had ramifications for foreigners hoping to work in the tiny Gulf state. The Philippines said on Tuesday it would temporarily stop sending workers to Qatar over concerns for their welfare. An estimated 200,000 Filipinos already work there.

Monday's announcement triggered an immediate 7.58 percent plunge on the Qatar Stock Exchange, while oil prices continued a multi-day fall, amid fears that OPEC production could be affected.

World markets nervous

Although local stocks reversed some of their losses in early trading on Tuesday, European and Asian markets still saw a sell off, as investors rushed for the safe haven of gold and German government bonds.

The row "has certainly increased geopolitical tensions in the region and could be a signal of the escalating tensions between the US and Iran as well," warned Greg McKenna, chief market strategist at Axi Trader.

With the world's third largest gas and extensive oil reserves, most analysts don't expect Qatar to be plunged into a full economic crisis by the blockade. But its $335 billion (298 billion euro) sovereign wealth fund, which invests globally, could come under pressure. Several domestic infrastructure projects may also be put on hold due to rising borrowing costs now facing Qatar's government.

Analysts said it was too early to speculate whether Qatar's hosting of the 2022 World Cup would be impacted.

mm/uhe (AFP, AP, Reuters)