Wall Street Shares Fall Sharply Amid Libyan Unrest

Political turmoil in the Middle East and North Africa continued to haunt financial markets on Tuesday, pushing up crude oil, driving down stock prices and sending investors into safe-haven investments.

The unrest seen during the overthrow of the leaders of Egypt and Tunisia has swept into Libya, Bahrain and Algeria. There have also been demonstrations in Yemen, Jordan, Syria and Lebanon.

“Over the past few weeks we had a domino effect, and the concern is that anything can happen,” said Justin Urquhart Stewart, a founder of Seven Investment Management in London. “At the moment the ripple is very small, but it has the potential to turn into something bigger quickly.”

Much of the uncertainty is being stoked by fears over oil supplies. Analysts have been keeping an eye on Libya, which has the largest oil reserves in Africa, and on Bahrain, which is next to Saudi Arabia.

“Geopolitical ripples in the Middle East are the basis for today’s decline,” said Lawrence R. Creatura, a portfolio manager at Federated Investors.

“Higher energy prices act like a tax on consumers, reducing the amount of discretionary purchasing power that they have,” Mr. Creatura said. “It represents an additional, potential headwind for retailers.”

Treasury prices rose and stocks declined in the United States, where the main Wall Street stock indexes have risen steadily in recent months to levels not seen since the financial crisis started.

The Dow Jones industrial average was down more than 200 points in the late afternoon. But it closed down 178.46 points, or 1.44 percent, at 12,212.79. The broader Standard & Poor’s 500-stock index declined 27.57 points, or 2.05 percent, at 1,315.44, while the technology heavy Nasdaq lost 77.53 points, or 2.74 percent, at 2,756.42.

In addition to the turmoil in the Middle East, investors took in some discouraging developments in the United States economy.

Shares of Wal-Mart, the world’s largest retailer, dropped 3.1 percent after the company said sales at stores open at least a year in the United States fell 1.8 percent in the fourth quarter.

Real estate prices slid again in December, pushing a leading price index, the Standard & Poor’s/Case-Shiller Home Price Index of 20 large metropolitan areas, down 1 percent in December on an unadjusted basis.

Financials, industrials and materials shares shed more than 2 percent in the broader market. Shares of Bank of America slid more than 3.8 percent to $14.18.

Airlines were hit with uncertainty over the impact of the higher energy prices. United Continental Holdings Inc. fell more than 9 percent to $24.44, and the AMR Corporation, the parent of American Airlines, fell more than 5 percent to $7.02.

Among energy stocks, Exxon Mobil gained 1.1 percent to $85.44, and rival Chevron rose 1.6 percent at $100.32.

Gold and bond prices rose as investors sought safe havens. The yield on 10-year Treasury notes was 3.46 percent down from 3.58 percent late Friday.

“You are getting a flight to quality bid,” said Laura LaRosa, the director of fixed income at Glenmede. “The equity market is feeling jittery with what is going on in the Middle East.”

“The more volatile, the more I would think people would flock to Treasuries right now,” she said. “I would imagine if there is continued volatility you will continue to see that on a daily basis.”

Markets in Europe and Asia were also lower. In Europe, the FTSE-100 in London lost 0.3 percent while the CAC-40 in Paris declined by 1.1 percent.

In Asia, the Nikkei 225 closed 1.8 percent lower on Tuesday, and the Hang Seng in Hong Kong sank 2.1 percent.

In an effort to calm turbulent oil markets, Saudi Arabia’s oil minister, Ali al-Naimi, said that the Organization of the Petroleum Exporting Countries was ready to meet any shortage in supply by the unrest.

Light, sweet crude oil for April delivery surged in New York, rising $5.71, or 6.4 percent, to settle at $95.42 The April contract for Brent crude, a global benchmark for oil that trades in London, was up 1 percent at $106.72 a barrel, after hitting $108.57 earlier in the session.

The Paris-based International Energy Agency tried to reassure oil markets, saying that it “stands ready, as always, to make oil available to the market in the event of a major supply disruption if alternative supplies cannot readily be made available via normal market mechanisms.”

For the moment, it added in a statement, “we are not in a situation where that is necessary.”

But some noted that it is the prospect, rather than the reality, of dislocations in supply that was currently spooking the markets.

“Obviously as this situation in the Middle East continues to unravel it is about fear,” said Thomas Bentz, an energy analyst with BNP Paribas. “It is worry that we will continue to see this unrest spreading across other major oil producers. Prices react to the potential loss of supply; it doesn’t necessarily have to be that there is an actual loss of supply.”