* Qatar sinks as hopes for end to diplomatic dispute fade
* Saudi's Tasnee down; US questions titanium dioxide deal
* Dar Al Arkan continues surge after MSCI index inclusion
* Drake & Scull soars in Dubai but Emaar Development sinks
* Abu Dhabi's ADNOC cuts price range for unit's IPO
By Andrew Torchia
DUBAI, Dec 6 (Reuters) - Most Middle Eastern stock markets fell on Wednesday because of sliding foreign bourses and negative geopolitical news related to Qatar and Yemen.
Qatar was the hardest hit major market, with its index dropping 1.5 percent. Qatar National Bank, the biggest bank, tumbled 3.3 percent, while drilling rig provider Gulf International Services sank 6.5 percent.
The market surged early this week on hopes for progress in resolving Qatar's diplomatic dispute with four other Arab states. But those hopes were dashed when Saudi Arabia, the United Arab Emirates and Bahrain, in an apparent snub of Qatar, did not send their heads of state to this week's regional summit in Kuwait.
The extent of the Qatari market's disappointment was seen in the fact it ignored a big piece of positive news: index compiler MSCI said overnight that it would continue to use onshore foreign exchange rates to value Qatari stocks for now, instead of switching to offshore rates, as it had threatened to do.
To prevent the switch, which could have reduced Qatari stocks weightings in MSCI's emerging markets index, Qatar's central bank pledged to supply currency at onshore rates to all investors.
Saudi Arabia's index dropped 0.6 percent as National Industrialisation (Tasnee) plunged 8.1 percent after the U.S. Federal Trade Commission filed a complaint aimed at stopping chemical maker Tronox Ltd from purchasing the titanium dioxide business of Tasnee's affiliate Cristal.
But the most heavily traded stock, real estate firm Dar Al Arkan, soared 9.3 percent to 11.94 riyals; it was around 7.50 riyals as recently as mid-November, when MSCI said it was adding the stock to its Saudi Arabia Index.
Saudi Industrial Export Co jumped 3.2 percent in unusually heavy trade after the market regulator approved its request to reduce its capital to 10.8 million riyals ($2.9 million) from 108 million riyals.
The Saudi market rose early this week after Yemen's ex-president Ali Abdullah Saleh offered to support the Saudi-led coalition's military intervention there, but Saleh's subsequent assassination ended that optimism.
Dubai's index edged up 0.02 percent because builder Drake & Scull, which has been restructuring its business, rocketed 9.6 percent. After it reported a big loss for the third quarter, some investors are betting there is little bad news left for its fourth-quarter results.
But Emaar Properties slipped 0.5 percent and affiliate Emaar Development fell 1.3 percent to 5.55 dirhams, its lowest finish since it listed on Nov. 22 after an initial public offering at a price of 6.03 dirhams.
In late November, HSBC started its coverage of Emaar Development with a "reduce" rating and a target of 5.30 dirhams.
Abu Dhabi's index climbed 1.1 percent as First Abu Dhabi Bank gained 2.0 percent.
But in a sign of the market's weakness, Abu Dhabi National Oil Co cut the price range for an IPO of its fuel distribution unit and will sell only a 10 percent stake in the unit, valuing the potential deal at $900 million.
ADNOC had said last month it could sell as much as 20 percent of the unit in a higher price range, which would have valued the deal as high as $2 billion.
* The index fell 0.6 percent to 7,026 points.
* The index edged up 0.02 percent to 3,395 points.
* The index rose 1.1 percent to 4,311 points.
* The index sank 1.5 percent to 7,798 points.
* The index dropped 0.8 percent to 14,346 points.
* The index fell 0.3 percent to 6,197 points.
* The index dropped 0.6 percent to 1,265 points.
* The index lost 0.4 percent to 5,091 points. (Editing by Mark Potter)