(Adds details, analysis)
By Celine Aswad
DUBAI, June 5 (Reuters) - Qatar's stock market plunged on Monday after Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed ties with Doha, accusing it of supporting terrorism.
The Qatari stock index sank 7.6 percent in the first hour of trade. Some of the market's top blue chips were hit hardest, with Vodafone Qatar, the most heavily traded stock, sliding its 10 percent daily limit.
Qatar National Bank, the country's largest bank, dropped 5.7 percent.
Saudi Arabia, the UAE and Bahrain announced the suspension of transport ties with Qatar, and gave Qatari visitors and residents two weeks to leave their borders.
With an estimated $335 billion of assets in its sovereign wealth fund, a trade surplus of $2.7 billion in April alone and extensive port facilities which it can use instead of its land border with Saudi Arabia, which has been closed, Qatar appears likely to be able to avoid a crippling economic crisis.
The six countries in the Gulf Cooperation Council do little merchandise trade with each other, instead relying on imports from outside the region, and Qatar's liquefied natural gas shipments by sea are expected to continue normally.
Saudi Arabia and other GCC countries traditionally account for only about 5 to 10 percent of daily trading on the Qatari stock market, according to exchange data.
But the diplomatic rift could have a serious impact on some business deals and companies in the region, particularly Qatar Airways, which can no longer fly to some of the Middle East's biggest markets.
Saudi Arabia called on international companies to avoid Qatar, raising the prospect that it might try to make foreign firms choose between doing business in Qatar and obtaining access to the much bigger Saudi economy.
Talal Touqan, head of resesrch at Abu Dhabi’s Al Ramz Capital, said it was not clear how long the dispute would last and markets could recover quickly if tensions eased.
“This is a reaction to political noise which has a direct impact on volatility - it may be short-ived and fully reversible if the political situation starts to abate,” he said.
Kunal Damle, an institutional broker at SICO Bahrain, said Qatari state funds might step in to support their market later in the day.
Other GCC stock marikets also fell, with Dubai losing 0.8 percent and Saudi Arabia falling 0.2 percent. (Editing by Andrew Torchia)