By Noah Browning

DUBAI (Reuters) - The Arab world's biggest powers cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran, and reopening a festering wound two weeks after U.S. President Donald Trump's demand for Muslim states to fight terrorism.

Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed diplomatic relations with Qatar in a coordinated move. Yemen, Libya's eastern-based government and the Maldives joined later. Transport links shut down, triggering supply shortages.

Qatar, a small peninsular nation of 2.5 million people that has a large U.S. military base, denounced the action as predicated on lies about it supporting militants. It has often been accused of being a funding source for Islamists, as has Saudi Arabia.

Iran, long at odds with Saudi Arabia and a behind-the-scenes target of the move, blamed Trump's visit last month to Riyadh and called for the sides to overcome their differences.

"What is happening is the preliminary result of the sword dance," tweeted Hamid Aboutalebi, deputy chief of staff to Iranian President Hassan Rouhani, referring to Trump's joining in a traditional dance with the Saudi king at the meeting.

Closing all transport links with Qatar, the three Gulf states gave Qatari visitors and residents two weeks to leave, and Saudi Arabia, Bahrain and Egypt banned Qatari planes from landing and forbade them from crossing their air space.

Qatar's stock market index sank 7.3 percent, with some of the market's top blue chips hardest hit, and some Egyptian banks said they were suspending dealing with Qatari banks.

The UAE and Saudi Arabia stopped exports of white sugar to Qatar, a potential hit to consumers during the holy month of Ramadan, when demand is high. Some residents in Qatar began stockpiling food and supplies, an expatriate said.

"People have stormed into the supermarket hoarding food, especially imported ones. ... It's chaos - I've never seen anything like this before," said Eva Tobaji, an expatriate resident in Doha, told Reuters after returning from shopping.

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Supply difficulties quickly developed. Two Middle East trade sources spoke of thousands of trucks carrying food stuck at the Saudi border, unable make the sole overland frontier crossing into Qatar.

About 80 percent of Qatar's food requirements are sourced via bigger Gulf Arab neighbors. Trade sources pointed to the likelihood of shortages growing in Qatar until the crisis eased.

Along with Egypt, however, the UAE and Saudi Arabia could be vulnerable to retaliation, being highly dependent on Qatar for liquefied natural gas.

'WORRISOME'

The hawkish tone on Tehran and on terrorism that Trump brought in his visit to Muslim leaders in Riyadh is seen as having laid the groundwork for the diplomatic crisis.

"You have a shift in the balance of power in the Gulf now because of the new presidency: Trump is strongly opposed to political Islam and Iran," said Jean-Marc Rickli, head of global risk and resilience at the Geneva Centre for Security Policy.

"He is totally aligned with Abu Dhabi and Riyadh, who also want no compromise with either Iran or the political Islam promoted by the Muslim Brotherhood."

The United States called for a quick resolution of the dispute, and does not want to see a "permanent rift," a senior U.S. administration official said.

"There’s an acknowledgement that a lot of Qatari behavior is quite worrisome not just to our Gulf neighbors but to the U.S.," the official said. "We want to bring them in the right direction."

A State Department official said all U.S. partnerships with Gulf nations were vital and called on all parties to quickly resolve their differences.

The U.S. military said it had seen no impact to its Gulf-area operations, intended mainly as a bulwark against Iran, and added it was grateful for Qatar's long-standing support of a U.S. presence and commitment to regional security.

The diplomatic bust-up threatens the international prestige of Qatar, which is set to host the 2022 soccer World Cup.

Soccer's governing body, FIFA, said on Monday it was in "regular contact" with Qatar's 2022 organizing committee, but did not comment directly on the diplomatic situation.

MUSLIM BROTHERHOOD

Qatar's backing of Islamists dates to a decision by the current emir's father to end a tradition of automatic deference to Saudi Arabia, the dominant Gulf Arab power, and forge the widest possible array of allies.

Doha subsequently cultivated not only Islamists like America's foes Iran, Hamas and the Taliban in pursuit of leverage, but also Washington itself, hosting the largest U.S. air base in the Middle East.

Qatar has for years presented itself as a mediator and power broker for the region's many disputes. But Egypt and the Gulf Arab states resent Qatar's support for Islamists, especially the Muslim Brotherhood, which they see as a political enemy.

Muslim Brotherhood groups allied to Doha are now mostly on retreat in the region, especially after a 2013 military takeover in Egypt ousted the elected Islamist president.

The former army chief and now president, Abdel Fattah al-Sisi, along with Cairo's allies in Saudi Arabia and the UAE, blacklist the Brotherhood as a terrorist organization. The Brotherhood says it supports only peaceful politics.

Saudi Arabia accused Qatar on Monday of backing militant groups and broadcasting their ideology, an apparent reference to Qatar's influential state-owned satellite channel al Jazeera.

Later in the day, the kingdom shut the Saudi bureau of al Jazeera. Al Jazeera says it is an independent news service giving a voice to everyone in the region.

Riyadh also accused Qatar of supporting what it described as Iranian-backed militants in the restive, largely Shi'ite Muslim-populated eastern Saudi region of Qatif, as well as in Bahrain.

Qatar denied it was interfering in the affairs of others.

"The campaign of incitement is based on lies that had reached the level of complete fabrications," the Qatari foreign ministry said in a statement.

Turkey also called for dialogue to settle the dispute and a government spokesman said President Tayyip Erdogan was working for a diplomatic solution to the rift.

Sudan expressed its concern over the row and offered to mediate between all sides.

FALLOUT

A split between Doha and its closest allies could have repercussions around the Middle East, where Gulf states have used their financial and political power to influence events in Libya, Egypt, Syria, Iraq and Yemen.

The economic fallout was already hitting home as Abu Dhabi's state-owned Etihad Airways, Dubai's Emirates Airline and budget carriers Flydubai and Air Arabia said they would suspend all flights to and from Doha indefinitely from Tuesday morning.

Qatar Airways said on its official website it had suspended all flights to Saudi Arabia. Many Gulf airports, including in Qatar, are major hubs for international connecting flights.

The measures are more severe than during a previous eight-month rift in 2014, when Saudi Arabia, Bahrain and the UAE withdrew their ambassadors from Doha, again alleging Qatari support for militant groups. At that time, travel links were maintained and Qataris were not expelled.

Neighboring Kuwait has been mediating in the dispute, and its emir, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, urged Qatar's ruler to calm tensions and refrain from escalating the rift, Kuwait state news agency Kuna said.

Al-Sabah called on Qatar's Tamim bin Hamad bin Khalifa Al-Thani to give efforts at mediation a chance to contain differences, a few hours after Khalid al-Faisal, an adviser to the Saudi king, visited Kuwait.

(Additional reporting by William Maclean, Parisa Hafezi, Omar Fahmy, Mohammed el-Sherif, Sylvia Westall, Tom Finn, Steve Holland, Amina Ismail and Yara Bayoumy; Editing by Larry King and Peter Cooney)