Major stock markets in the Gulf retreated in early trade on Wednesday, tracking Asian shares after a blast in Poland raised fears that the Russian-Ukraine conflict could spill over.

NATO member Poland said a Russian-made rocket killed two people in eastern Poland near Ukraine, and it summoned Russia's ambassador to Warsaw for an explanation after Moscow denied it was responsible.

Worries over a potential ratcheting up of geopolitical tensions spurred a drop of 1% in MSCI's broadest index of Asia-Pacific shares outside Japan.

Saudi Arabia's benchmark stock index dropped 1%, dragged down by a 0.9% fall in Retal Urban Development Co and a 1.1% decline in oil giant Saudi Aramco .

The kingdom recorded an 85% year-on-year slump in second-quarter foreign direct investment (FDI) flows, an investment ministry report showed on Tuesday.

FDI inflows were at 7.9 billion riyals ($2.10 billion) in the second quarter, compared with about 51.9 billion riyals in the same period last year.

Meanwhile, Abdullah Al Othaim Markets Co surged 8% after the food retailer announced distribution of cash dividend of 7.5 riyals per share for the third quarter.

Dubai's main share index fell 1%, with blue-chip developer Emaar Properties down 1.1%.

In Abu Dhabi, the index lost 0.3%.

Crude prices - a key catalyst for the Gulf's financial markets - slid as COVID-19 cases in China continued to climb, sparking worries of lower fuel demand in the world's top crude importer that outweighed concerns about an escalation of geopolitical tensions and tighter oil supply.

The Qatari benchmark dropped 1.1%, weighed down by a 1.8% fall in Qatar Islamic Bank and a 0.8% decline in Qatar National Bank.

($1 = 3.7580 riyals)

(Reporting by Ateeq Shariff in Bengaluru; Editing by Subhranshu Sahu)