The Saudi-led Arab coalition fighting Yemen's Houthi rebels also expelled Qatar from its alliance, alleging support of "al-Qaeda and Daesh [also known as ISIS], as well as dealing with the rebel militias", according to Saudi's state media agency.
Saudi Arabia cut all land air and sea contacts with Qatar "and urges all brotherly countries and companies to do the same".
The crisis began in late May when Qatar alleged that hackers took over the site of its state-run news agency and published what it called fake comments from its ruling emir about Iran and Israel.
Riyadh accused Qatar of backing terrorism and extremism, while Bahrain charged Qatar with interfering in it internal affairs.
Qatar's government claimed its official websites had been hacked and categorically denied in which the country's leader expressed support for Iran.
Saj Ahmed, the UK-based chief analyst at StrategicAero Research, warned of disruptions in the Gulf Cooperation Council (GCC) states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, as well as further afield.
Etihad, the Abu Dhabi-based carrier, said it would suspend flights to Qatar "until further notice".
Risk of hung parliament drives down sterling
Following the previous election , the Conservatives won a working majority of 17 seats in the 650-member House of Commons. And former Labour leader Ed Miliband tweeted this succinct take-down of polling in general.
The countries are most anxious about Qatar's support for the Muslim Brotherhood - a Sunni Islamist political group outlawed by both Saudi Arabia and the UAE as it challenges those nations' hereditary rule.
Saudi Arabia's official state news agency confirmed that the kingdom chose to end diplomatic and consular relations with Qatar "proceeding from the exercise of its sovereign right guaranteed by worldwide law and the protection of national security from the dangers of terrorism and extremism".
Emirates, Qatar Airways and Etihad were among 10 airlines on which the Trump administration imposed tough new restrictions in March.
"We are friends, we've been friends now for a long time, haven't we?"
Less than a month ago, US President Donald Trump visited the region to cement ties with powerhouse Saudi Arabia - the first foreign stop of his young presidency.
The diplomatic row involving Qatar has sparked a flurry of activity from airlines suspending flights to the country.
"Qatar is a regular exporter of gas-to-liquid (GTL) diesel from the Pearl GTL (plant) which (Royal Dutch Shell) partners, so Shell can easily source the gasoil from elsewhere if needed", said the second source, a Singapore-based trader.