* Trump calls Gulf Arab leaders, voices concern
* Terrorist financing is "overriding" issue-Trump
* State Dept urges restraint
* Qatar says can discuss "legitimate" concerns
* But Doha says four states target its sovereignty
By Tom Finn and Hadeel Al Sayegh
DOHA/DUBAI, July 3 (Reuters) - Four Arab states that accuse Qatar of supporting terrorism agreed to extend until Tuesday a deadline for Doha to comply with a list of demands, as U.S. President Donald Trump voiced concerns about the dispute to both sides.
Qatar has called the charges baseless and says the stiff demands - including closing Qatar-based al Jazeera TV and ejecting Turkish troops based there - are so draconian that they appear designed to be rejected.
Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (UAE) have raised the possibility of further sanctions against Qatar if it does not comply with the 13 demands presented to Doha through mediator Kuwait.
They have not specified what further sanctions they could impose on Doha, but commercial bankers in the region believe that Saudi, Emirati and Bahraini banks might receive official guidance to pull deposits and interbank loans from Qatar.
According to a joint statement on Saudi state news agency SPA, the four countries agreed to a request by Kuwait to extend by 48 hours Sunday's deadline for compliance.
Foreign ministers from the four countries will meet in Cairo on Wednesday to discuss Qatar, Egypt said on Sunday.
Kuwait state media said its Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah had received a response by Qatar to the demands. It did not elaborate.
The four states cut diplomatic and commercial ties with Qatar on June 5, accusing it of supporting terrorism, meddling in their internal affairs and cozying up to regional adversary Iran, all of which Qatar denies. Mediation efforts, including by the United States, have been fruitless.
Trump spoke separately to the leaders of Saudi Arabia, Qatar and the Crown Prince of Abu Dhabi in the UAE to discuss his "concerns about the ongoing dispute", the White House said.
"He reiterated the importance of stopping terrorist financing and discrediting extremist ideology. The president also underscored that unity in the region is critical to accomplishing the Riyadh Summit's goals of defeating terrorism and promoting regional stability," the White House said.
"President Trump, nevertheless, believes that the overriding objective of his initiative is the cessation of funding for terrorism," it said.
A State Department official said on Sunday that the United States encourages "all parties to exercise restraint to allow for productive diplomatic discussions."
Qatari officials have repeatedly said the demands are so strict that they suspect the four countries never seriously intended to negotiate them, and were instead seeing to hobble Doha's sovereignty.
But they have also said Qatar is interested in negotiating a fair and just solution to "any legitimate issues" of concern to fellow member states of the Gulf Cooperation Council, which groups Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the UAE.
Qatar's Gulf critics accuse Al Jazeera of being a platform for extremists and an agent of interference in their affairs. The network has rejected the accusations and said it will maintain its editorial independence.
Gulf countries have insisted the demands were non- negotiable.
The UAE's minister of state for foreign affairs, Anwar Gargash, has played down the chances of an escalation, saying "the alternative is not escalation but parting ways", suggesting Qatar may be forced out of the GCC.
The Western-backed body was formed in 1981 in the wake of Iran's Islamic Revolution and the outbreak of the Iran-Iraq war.
Speaking in Washington last week, the Qatari foreign minister said the GCC was set up to guard against external threats. "When the threat is coming from inside the GCC, there is a suspicion about the sustainability of the organization," Sheikh Mohammed al-Thani told reporters. (Additional reporting by Jeff Mason in Bridgewater, N.J.; Writing by William Maclean; editing by John Stonestreet)