The index recovered some ground later to close 3.5% down.
The development comes after a Saudi delegation of a dozen officials arrived in Turkey while Saudi King Salman and Turkish President Recep Tayyip Erdogan at the weekend discussed the case in their first telephone talks on the controversy.
According to his fiancee, Khashoggi entered the Saudi consulate in the Turkish city of Istanbul and never came out. The losses wiped out all the market's gains in 2018, although it is still up 8% from a year ago.
The German, French and British foreign ministers said in a joint statement Sunday that defending freedom of expression and ensuring protection for journalists are key priorities and that they are "treating this incident with the utmost seriousness". Saudi Arabia has denied responsibility for the disappearance.
An investment conference seen as a platform for the crown prince due to take place next week in Riyadh and dubbed "Davos in the Desert", has been hit by a string of prominent cancellations. Trump also told reporters Saturday that there would be "very powerful" repercussions if Saudi Arabia is found to be responsible.
Salman emphasised the importance of the Turkey-Saudi relationship and said no-one should be able to "undermine the strength of this relationship", official Saudi media said.
Where is Jamal Khashoggi?...
Cengiz said in the article that Khashoggi had been "cheerful" on the morning they traveled together to the consulate, and that the couple had made plans for the rest of their day. "We're going to get to the bottom of it, and there will be severe punishment".
"I had planned a party, inviting his closest friends to surround him with the love and warmth that he had missed", she wrote.
Cengiz said Khashoggi fled Saudi Arabia with two suitcases for the U.S. "amid a crackdown on intellectuals and activists who criticized Crown Prince Mohammed bin Salman".
Cengiz added that she had seen reports President Trump wanted to invite her to the White House.
The U.S. administration increasingly regards Saudi Arabia's denial of any involvement in the journalist's disappearance as untenable, and Trump and his aides are more and more convinced that he died after entering the consulate, according to three U.S. officials who asked not to be identified because of the sensitivity of the matter.
Earlier on Sunday, Secretary-General of the Gulf Cooperation Council (GCC) Abdul Latif bin Rashid Al Zayani denounced the media campaign against Saudi Arabia and pointed out that some media outlets "violated principles of the code of ethics in the media".