Stock markets in the Gulf were mostly subdued on Sunday, weighed down by concerns that the U.S. Federal Reserve will make fewer rate cuts next year, though a cooler-than-expected inflation report kept the losses in check.

Markets were jolted after the Fed forecast only two rate reductions in 2025 and raised its inflation estimate, in a nod to the economy's continued resilience and still-high price rises.

Following the November inflation data, traders raised their rate cut bets for 2025, now expecting a rate cut first in March and then again by October.

The Fed's decisions have a significant impact on the Gulf region's monetary policy, as most currencies there are pegged to the U.S. dollar.

Saudi Arabia's benchmark index <.TASI> was down for a second straight session, falling 0.4%, with most sectors in the red.

Healthcare provider Dr Sulaiman Al Habib Medical Services <4013.SE> slipped 4% and Saudi Aramco <2222.SE> lost 1.9%.

SABIC Agri-Nutrients Company <2020.SE> gained 3% after the fertilizer and chemicals maker declared a cash dividend of 3 riyals per share for the second half of the year and said it has amended the protocol for declaration and distribution of interim dividends.

The Qatari benchmark index <.QSI> rose 1% as it resumed trading after a two-day break for a national holiday, lifted by gains in almost all stocks. Qatar Islamic Bank <QISB.QA> climbed 1.6%, while Industries Qatar <IQCD.QA> gained 0.9%.

Meanwhile, Qatar's energy minister told the Financial Times the country would stop shipping gas to the European Union if member states strictly enforce a new law cracking down on forced labour and environmental damage.

Outside the Gulf, Egypt's blue-chip index <.EGX30> eased 0.5% with Commercial International Bank shedding 0.5% and E-Finance for Digital falling 2.5%.

SAUDI ARABIA

<.TASI> down 0.4% to 11,849

KUWAIT

<.BKP> rose 0.2% to 7,818

QATAR

<.QSI> gained 1% to 10,559

EGYPT

<.EGX30> down 0.5% to 30,373

BAHRAIN

<.BAX> fell 0.3% to 1,994

OMAN

<.MSX30> lost 0.5% to 4,488

($1 = 3.6450 Qatar riyals)

(Reporting by Md Manzer Hussain;Editing by Helen Popper)