* Fund flows continue into Doha after MSCI rebalancing
* Industries Qatar gains 2 pct, Qatar Gas up 5.7 pct
* Financials lead gains in Saudi ahead of MSCI move
* Property stocks extend gains in Dubai
* Egypt falls ahead of impending cut in energy subsidies
DUBAI, June 5 (Reuters) - Qatar and Saudi markets led Gulf stocks higher on Tuesday amid optimism index compiler MSCI will upgrade Riyadh to emerging market status and continued fund flows into Qatari blue-chips after MSCI recently raised their weightings.
Qatari stocks climbed 2 percent, with market heavyweight Industries Qatar rising 2 percent, Qatar Insurance surging 6.2 percent, and Qatar Gas Transport gaining 5.7 percent.
"We have noticed over the past few days since the MSCI rebalance that a lot of the residual buying from a lot of the active portfolios was still taking place," said a portfolio manager in Doha.
MSCI said last month it would raise the weightings of top Qatari companies after they increased their foreign ownership ceilings to 49 percent from 25 percent.
The Saudi index rose 0.9 percent, led by financial stocks. Riyad Bank surged 5.4 percent and Samba Financial Group rose 4 percent.
The market has become bullish after the appointment of a prominent businessman as labor minister and as it awaits a possible MSCI upgrade to emerging markets status this month.
The Saudi index is the best performing market in the Gulf region, up 16 percent so far this year.
Egyptian stocks fell 2.3 percent, with analysts attributing the drop to uncertainty over the public response to imminent energy subsidy cuts in light of protests in Jordan.
Orascom Telecom slumped 2.6 percent and EFG Hermes dropped 1.5 percent.
Egypt is expected to make deep cuts to fuel and electricity subsidies in the financial year starting in July, part of reforms tied to a three-year $12 billion IMF loan program the country hopes will draw back investors that fled after its 2011 uprising.
Analysts said ongoing demonstrations in Jordan over IMF-backed price increases had raised fears over the public response to similar measures in Egypt.
"People are in a state of panic, which is driving them to sell," said the head of research at Pharos Securities Brokerage, Radwa El-Swaify.
In Dubai, Emaar Properties extended gains to trade 1.8 percent higher, while DAMAC Properties rose 1.7 percent, lifting the benchmark index by 0.3 percent.
The Abu Dhabi index climbed 0.9 percent, helped by a 1.7 percent rise by Abu Dhabi National Energy Co (TAQA) on the back of strong oil prices. TAQA's shares have doubled this year.
* The index added 0.9 percent to 8,407 points. DUBAI
* The index rose 0.3 percent to 3,045 points. ABU DHABI
* The index gained 0.9 percent to 4,617 points. QATAR
* The index jumped 2.1 percent to 9,311 points. KUWAIT
* The index added 0.1 percent to 4,725 points. BAHRAIN
* The index was up 0.2 percent at 1,268 points. OMAN
* The index rose 0.1 percent to 4,592 points. EGYPT
* The index fell 2.3 percent to 16,022 points.
(Additional reporting Ehab Farouk in Cairo; Editing by Mark Potter)