By Hadeel Al Sayegh, Federico Maccioni and Andres Gonzalez

March 17 (Reuters) - Macquarie MQG.AX has withdrawn from bidding for a stake in Kuwait's oil pipeline network worth up to $7 billion, two sources familiar with the matter said, becoming one of the first known investors to pull out of a Gulf deal due to the Iran war.

The Australian infrastructure investor notified Kuwait Petroleum Corporation on Friday that it was exiting the process because of the conflict and uncertain outlook, one source said, as dealmakers try to press ahead with the transaction despite unprecedented regional volatility.

The move is a sign that the conflict is cooling investor enthusiasm for the Gulf, where millions of barrels of crude are stranded after Iran effectively shut the Strait of Hormuz.

Kuwait has no export route for its crude other than the narrow waterway between Iran and Oman, through which a fifth of global oil supply normally flows.

Companies and their advisers are trying to proceed with the sale even as uncertainty over valuations and execution risks mounts, more than half a dozen dealmakers told Reuters.

KPC launched the sale just hours before Iranian missiles first struck Gulf cities late last month, a third source said. Though KPC has declared force majeure and cut production, its bankers are still pursuing a deal, the three sources said. Advisers have sent out documents to potential investors and are seeking non-binding offers by April 7, the sources added.

Investors previously reported to have shown interest include BlackRock and KKR. Reuters was unable to determine whether they remained interested. Uncertainty over future volumes and the network's proximity to Iranian military assets is clouding the picture.

KPC and BlackRock did not immediately reply to requests for comment. Macquarie and KKR declined to comment.

Other deals are still being pursued.

Saudi Arabia's King Abdullah Financial District is seeking to sell its district cooling assets for more than $500 million, two other sources told Reuters, with non-binding offers submitted in the first week of March.

KAFD was not immediately available for comment.

Saudi infrastructure firm SISCO Holding is also pushing ahead with a water asset sale worth about 1 billion riyals ($266 million), said one of those sources and another. SISCO was not immediately available for comment.

(Reporting by Hadeel Al Sayegh and Federico Maccioni in Dubai, and Andres Gonzalez in London. Additional reporting by Yousef Saba in Cairo and Nazih Osseiran in Beirut. Editing by Mark Potter)

((hadeel.alsayegh@tr.com; +971566883310))