* Riyad Bank, NCB gain after merger talk
* Arab National Bank up on capital increase proposal
* Emirates NBD boosts Dubai index
* Commercial International Bank pressures Egypt blue-chip index
By Abinaya Vijayaraghavan and Ateeq Shariff
Dec 25 (Reuters) - The Saudi market fell on Tuesday, as plunging oil prices pressured petrochemical stocks, while Riyad Bank was the top gainer, reaching a four-year high after saying it was in merger talks with National Commercial Bank (NCB).
The Dubai index was the sole gainer of the session, inching up on the back of rises in its banking shares, with most major Gulf bourses slipping on tepid global sentiment and weak oil prices.
Oil prices plunged to their lowest level in more than a year on Monday, as fears of an economic slowdown weighed on the market.
The Saudi index was down 0.6 percent, with Al Rajhi Bank falling 1.6 percent, Saudi Basic Industries Corp losing 1.5 percent and Saudi Arabian Mining Co shedding 2.3 percent.
But Riyad Bank jumped 8.2 percent to its highest level since November 2014, after saying that National Commercial Bank, the kingdom's biggest lender by assets had begun discussions to merge with the firm. National Commercial Bank was up 1.5 percent.
The move comes two months after Saudi British Bank (SABB) and smaller rival Alawwal Bank agreed to create Saudi Arabia's third-biggest lender. That was the first major tie-up for the country's banking sector in recent times.
Consolidation among smaller lenders has increased in the past two years as profit margins have been squeezed by lower government and consumer spending in the face of weak oil prices.
Arab National Bank also rose 3 percent after its board recommended a capital increase to 15 billion riyals ($4.00 billion).
The Dubai index ended three straight days of losses, inching up 0.3 percent after hitting a five-year low on Monday.
Dubai's weak real estate market has been a big drag on property shares this year with Emaar Properties down more than a third year-to-date.
Emirates NBD, Dubai's biggest bank, rose 4.2 percent, while Mashreq Bank gained 8.3 percent.
The Egyptian blue-chip index fell 0.9 percent with Egypt's largest lender, Commercial International Bank, losing 0.9 percent, and Eastern Co also losing 0.9 percent.
EFG Hermes gained 0.6 percent. GEMS Education, which has a 50/50 joint venture agreement with EFG Hermes, exercised an option to buy a 50 percent stake in four schools in Egypt. Vortex Energy, a European renewable energy platform managed by the private equity arm of EFG Hermes, signed a deal to divest 49 percent of its wind power portfolio.
Qatar's index declined 1.3 percent with Islamic bank Masraf Al Rayan falling 2.6 percent, and Qatar National Bank losing 1.5 percent.
Abu Dhabi's main index slid 0.4 percent. Emirates Telecommunications Group was down 0.8 percent, and Abu Dhabi Commercial Bank fell 1.4 percent.
Dana Gas shed 3.1 percent in light trade. The company said Goldilocks Investment has increased its holding in the firm to 5.2 percent. ($1 = 3.7514 riyals)
SAUDI ARABIA * The index lost 0.6 percent to 7,718 points EGYPT *The EGX 30 Index lost 0.9 percent to 12,671 points DUBAI * The index gained 0.3 percent to 2,467 points ABU DHABI * The index was down 0.4 percent at 4,801 points QATAR * The Index shed 1.3 percent to 10,234 points KUWAIT * The index lost 0.6 percent to 5,273 points BAHRAIN * The index was flat at 1,313 points OMAN * The index was down 0.8 percent at 4,313 points
Reporting by Abinaya Vijayaraghavan and Ateeq Shariff in Bengaluru; Editing by Kirsten Donovan