DUBAI, May 28 (Reuters) - Gulf stock markets may remain depressed on Thursday after Brent oil prices dropped below $63 per barrel, but passive funds tracking MSCI's emerging markets index may lift a handful of local stocks which were upgraded in the benchmark review.
Oil prices fell by up to 3 percent for a second straight day on Wednesday as a resurgent U.S. dollar weighed on the market amid concern that U.S. crude supplies may have started rising again after three weeks of draws.
On Thursday, Brent crude has turned around but has edged up just 0.9 percent.
In the absence of major corporate news or other local developments, Gulf retail investors usually take cues from the oil market and with the commodity heading for a second straight weekly decline, their sentiment may be negative.
Dubai's market is particularly vulnerable after its main index fell below technical support in the 4,000 point area, where the index had peaked in December and February.
But several stocks in the region may rise on foreign inflows as global emerging market funds reshuffle their allocations in line with MSCI index adjustments.
In a semi-annual review announced this month and taking effect on Sunday, MSCI added Dubai's Emaar Malls, Doha-listed Qatar Insurance and Ezdan Holding to the emerging markets index for the first time.
It also increased the weightings of Abu Dhabi Commercial Bank and Doha Bank, while dropping Telecom Egypt from the index.
Passive funds usually replicate the benchmark and adjust their positions on the eve of index reviews taking effect, sometimes causing significant share price moves. Because that day falls on Sunday, when most markets outside the Middle East will be closed, passive funds may start adjustments on Thursday.
Qatar's bourse may remain under some pressure on concern that Doha might conceivably lose the right to host the 2022 soccer World Cup after the United States and Switzerland launched criminal probes against FIFA officials.
However, the Doha index came well off its lows on Wednesday in its initial reaction to the news, suggesting the impact has largely faded for now. The index dropped as much as 2.8 percent to a one-month low of 12,067 points but eventually closed at 12,229 points, a 1.5 percent decline.
On global markets, Asian shares have edged down, while the dollar scaled a 13-year peak against the yen as it rallied on expectations that the U.S. Federal Reserve will raise interest rates this year. (Reporting by Olzhas Auyezov; Editing by Andrew Torchia)