The Gulf standoff has ended with Abu Dhabi finally agreeing to rescue Dubai from its debt trap.

The richest of the Gulf emirates has provided $US10 billion to Dubai’s government – more than enough to repay the $US4.1 billion due on Monday to holders of a sukuk, or Islamic bond, issued by Nakheel, a property development arm of Dubai World.

The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010.

United Arab Emirates sharemarkets hit by the Dubai debt crisis have rebounded as trading resumed on Sunday from the extended national day holiday.

Abu Dhabi shares gained the most since March and Dubai’s index rose for the first time in three days on investor speculation last week’s drop was overdone.

Stocks in the Gulf region tumbled for a second straight session as anxiety over Dubai's debt crisis spread to Qatar and Kuwait.

The Dubai Financial Market's main index closed down 5.6% after falling 7.3% the previous day. A total of $US5 billion has now been wiped off the market’s value over the past two sessions.

Abu Dhabi stocks closed down 3.6%, while shares in Qatar and Kuwait were also hit, with benchmark measures down 8.3% and 2.7% respectively.

In an attempt to avert further financial shocks, the central bank of the United Arab Emirates has moved to shore up the Gulf’s banking system in the wake of the Dubai debt crisis.

The central bank took the unusual step during the long Muslim Eid religious holiday weekend to issue a statement on Sunday, ahead world sharemarkets opening today.

The wider Gulf community will continue to lend support to Dubai, according to Kensington Swan chairman Clayton Kimpton.

The Auckland-based law firm is about to open a branch in Abu Dhabi, the capital of the United Arab Emirates and has more than five years experience working in the region.

This morning, financial markets awoke to the news that Dubai’s flagship company Dubai World was close to defaulting on what is effectively sovereign debt.