Dubai stocks fell 7.4% on Thursday, the worst one-day drop for that market since 2009 as oil price declines hammer the outlook for the country.

Here's the ugly chart of Thursday's action, which wrapped up trading at 5 a.m. ET.

Thursday's drop also wiped out almost all of the remaining gains seen by Dubai's stock market since the start of February as the region's most volatile market lived up to its reputation.

Dubai Financial Market Index. Bloomberg

Earlier in the year the country was celebrated as one of the big success stories for investors. Between the start of 2013 and the middle of 2014, its stock market had registered a nearly 200% increase in what CNN described as "a perfect market storm of wealth creation."

That perfect storm now appears to be blowing the roof off.

Although not a major oil exporter, the country's position as one of the region's major finance and commercial hubs has left it vulnerable to the decline in oil prices as investors become concerned that economic activity in the region is likely to slow.

Global oil prices have fallen about 40% since June, putting increasing pressure on oil exporters.

The decline in oil prices will squeeze government revenues and consumer incomes, meaning the demand for shopping and banking services are likely to decline. This is likely to hit companies based in Dubai hard. Indeed, the most recent time this happened, its United Arab Emirates neighbor Abu Dhabi was forced to help it pay off its debts with a $10 billion handout.

Investors are much less concerned about bad debts this time around, but the pain for company revenues could still be very real.

Elsewhere Abu Dhabi's ADX General Index, Oman's MSM 30 Index, and Qatar's QE Index were all also down by over 4%, while Saudi Arabia's Tadawul All Share Index fell by a more modest 2.4%.

Gary Dugan, chief investment officer at National Bank of Abu Dhabi PJSC, told Bloomberg:

"The problem at the moment is that no one can establish where the oil price is going to finally end up. Everyone kept waiting for the oil price rebound, but it hasn’t come."



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