NEW YORK (AP) — Stocks fell sharply and oil prices spiked to their highest level in two years on Tuesday as unrest in Libya worsened.
Oil prices jumped 6% to $95 a barrel. The fight between protesters and forces loyal to the Libyan leader Moammar Gadhafi threatens oil production from the world's 15th largest oil exporter, accounting for 2% of global daily output. Libya also sits atop the largest oil reserves in Africa.
The Dow Jones industrial average sank 178.46 points, or 1.4%, to close at 12,212.79. Bond prices rose as investors sought safety.
Libyan leader Moammar Gadhafi vowed to fight to his "last drop of blood" and roared at his supporters to take to the streets against protesters demanding his ouster.
The Standard & Poor's 500 index fell 27.57, or 2%, to 1,315.44. It was the worst day for the S&P since Aug. 11.
The Nasdaq fell 77.53, or 2.7%, to 2,756.42.
Among traders, the main worry is that unrest will spread to other oil-rich countries in the Middle East and North Africa. Protests toppled longtime dictators in Libya's neighbors Tunisia and Egypt in the past month, and protests are continuing in Yemen and Bahrain.
Jim Ritterbusch, an energy analyst, said a "fear premium" has added about $10 a barrel to oil prices in recent days. Prices could tumble once the region settles down, he said.