* Emerging stocks fall 0.4 pct, unsettled by Mideast
* Dubai index at 6-1/2 year low, Saudi at 22-mth low
* Oil continues to boost rouble to fresh 9-mth peaks
By Caroline Copley
LONDON, March 2 (Reuters) - Emerging markets slumped on Wednesday, as escalating unrest in the Middle East spooked investors, sending stock markets in Dubai and Saudi Arabia to multi-month and multi-year lows.
Popular uprisings that have toppled veteran rulers in Tunisia and Egypt, spread to oil-producing Gulf States Oman and Bahrain and seen violent conflict in Libya, have rattled investors’ appetite for risk, with little turnaround expected in the near future.
“This is going to be a bumpy ride for the MENA region and is likely to take its toll on the rest of the world as well, particularly for oil prices,” said Turker Hamzaoglu, MENA economist at BoA-ML.
“There are no countries in the region immune to the spillover from Tunisia and Egypt, we are going to have these headlines for quite a while.”
Saudi Arabia’s benchmark index .TASI dropped to a 22-month low, after suffering its largest decline in more than two years on Tuesday, with investors ditching stocks as online activists called for protests in the kingdom on March 11 and 20. [ID:nLDE71R2EC]
The cost of insuring debt in Saudi Arabia rose 9 basis points to 145 basis points, according to Markit -- levels not seen since July 2009. One-year dollar/Saudi riyal currency forwards eased slightly off 2-year highs of 75 basis points set a day earlier -- a higher figure points to a weaker currency in a year’s time.
Indices in Dubai and Oman also plummeted. Dubai’s benchmark .DFMGI extended declines to hit a 6-1/2 year low, while Oman’s index .MSI shed 1.5 percent, ending lower for the tenth session in 11. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For more on the Middle East unrest, click on: [ID: Nlde71M1AF] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The benchmark emerging equity index .MSCIEF fell 0.4 percent, but emerging sovereign debt 11EMJ narrowed 2 basis points to trade 270 bps over U.S. Treasuries.
The Thomson Reuters emerging Europe index .TRXFLDEEPU also lost 0.2 percent.
Russia's index .IRTS bucked the weaker trend, adding 0.7 percent to hover at 31-month highs thanks to the high prices for oil -- a key source of revenue for Russia and a key driver of the rouble's gains in recent months.
The rouble surged to a more than 2-year peak against the euro-dollar basket RUS=MCX after the central bank widened its trading band to deter speculators and allow more room for currency appreciation that will help it battle inflation.
“A wider, stronger corridor, rouble-bullish policymaker rhetoric and high oil prices make continued rouble appreciation possible,” analysts at JPMorgan said in a note, forecasting that the rouble would firm to 33.00 against the basket by mid-year, from 33.41 currently.
In contrast, markets in Turkey -- which imports 95 percent of the crude it uses -- continued to weaken. The main ISE 100 share index, which has fallen 11 percent this year, dipped 0.2 percent .XU100, while the benchmark bond yield hit its highest level since May.
Subdued risk appetite capped big moves in eastern Europe’s currencies. Hungary’s forint recouped losses, rising 0.3 percent EURHUF=, but the Polish zloty handed back gains of around half a percent EURPLN= after its central bank kept interest rates on hold in a decision that had been a tight call.
Robust domestic demand helped Poland’s economy grow 4.4 percent year-on-year official data showed, but a slim majority of analysts polled by Reuters had expected the central bank to hold off raising rates despite concerns over rising inflation.
“The latest comments from (Governor Marek) Belka and other MPC (Monetary Policy Committee) members suggest there might be a pause for while, the mindset now is for unchanged rates,” said Luis Costa, head of CEEMA fixed income and currency strategy at Citi.
Additional reporting by Carolyn Cohn; editing by Patrick Graham