Saudi Arabia's stock market closed higher on Sunday as investors turned their focus to U.S. Federal Reserve interest rate cuts, while Egypt's main index retreated amid rising tensions in Gaza.

U.S. producer prices increased slightly more than expected in June amid a rise in the cost of services, but that did not change expectations that the Federal Reserve could start cutting interest rates in September.

Markets have now priced in a quarter percentage-point cut in September compared with seeing just over a 50% chance of that a month ago.

Monetary policy in the six-member Gulf Cooperation Council (GCC) is usually guided by the Fed's decisions as most regional currencies are pegged to the U.S. dollar.

Saudi Arabia's benchmark index <.TASI> gained 0.8%, with Al Taiseer Group <4143.SE> advancing 10%, and Al Rajhi Bank <1120.SE> closing up 1.1%.

In Qatar, the index <.QSI> eased 0.1%, hit by a 0.4% fall in Qatar Islamic Bank <QISB.QA>.

Oil futures prices settled slightly lower on Friday as investors weighed weaker U.S. consumer sentiment against mounting hopes for a Federal Reserve rate cut in September.

Outside the Gulf, Egypt's blue-chip index <.EXG30> dropped 0.9%, as most of its constituents were in negative territory including Talaat Mostafa Group <TMGH.CA>, which was down 3.9%.

The Egyptian market drop follows an Israeli airstrike in Gaza that according to the enclave's health ministry killed at least 90 Palestinians in a designated humanitarian zone on Saturday. Israel said the attack had targeted Hamas military chief Mohammed Deif.

SAUDI ARABIA

<.TASI> rose 0.8% to 11,882

QATAR

<.QSI> down 0.1% to 10,172

EGYPT

<.EGX30> lost 0.9% to 28,042

BAHRAIN

<.BAX> lost 0.5% to 1,982

OMAN

<.MSX30> eased 0.1% to 4,700

KUWAIT

<.BKP> gained 0.5% to 7,789

(Reporting by Ateeq Shariff in Bengaluru; Editing by Hugh Lawson)