DUBAI, June 8 (Reuters) - Prices of Qatari credit default swaps, used to insure against the risk of a sovereign debt default, rose sharply early on Thursday after the country's credit rating was downgraded because of its diplomatic rift with other Gulf states.

Five-year CDS were at 89 points, the highest level since early December last year, compared to 80 late on Wednesday and 65.5 at the end of last week, before Saudi Arabia, the United Arab Emirates and Egypt cut ties with Qatar, accusing it of backing terrorism.

Standard & Poor's cut its long-term rating of Qatar by one notch late on Wednesday to AA- from AA and put the rating on CreditWatch with negative implications, meaning there was a significant chance of a further downgrade.

Qatari CDS now imply a default probability of 6.0 percent in the next five years.

Saudi Arabian CDS also rose sharply, to 98 points from 90, after oil prices fell about 4 percent overnight. (Reporting by Andrew Torchia)