Market analysts and traders said the spike in oil prices directly led to a stock market sell-off in which the Dow fell 163.48 points, or 1.6 percent, to close at 9963.03, as 29 of 30 stocks in the average closed lower. It was the worst one-day point and percentage decline for the Dow since March 11, when it dropped 168.51, or 1.64 percent.

Other major market indicators sank as well.

All three major stock market indicators have lost ground this year. The Nasdaq has fared worst, down 9 percent. The Dow is off 4.7 percent, while the S&P 500 is down 2.8 percent.

Despite the recent spike, energy analysts and economists said that when adjusted for inflation, oil prices are still far from where they were during the energy crisis of the late 1970s and early 1980s, and that the United States has a solid supply of gasoline.

But experts also said oil prices are high enough to dent consumer spending, threatening a key pillar of the economic recovery at a time when the health of business spending and hiring remains uncertain.

If businesses fail to pick up spending where consumers leave off, or fail to sufficiently increase workers' paychecks, the recovery could falter. That fear is reflected in the stock market.

"Oil prices are clearly part of the market's weakness," said Henry Cavanna of Cavanna Capital Management. "The question is whether they will undermine economic expansion."

A large part of the answer could come today, when the Labor Department issues its July jobs report. The economy has added jobs every month since last August, but the size of the monthly increase peaked in March and has dipped in each of the three months since.

Economists say employment must rise by around 200,000 jobs per month to keep the recovery on track. Only 112,000 jobs were created in June.

Yesterday's jump in oil prices came after the Russian government changed course and blocked Yukos Oil Co. from using frozen bank accounts to finance operations.

Yukos is fighting bankruptcy amid charges by the Russian government that it owes $3.4 billion in back taxes.

Mikhail Khodorkovsky, the largest shareholder in Yukos' parent company, is on trial in Moscow on charges of fraud and tax evasion.

Oil prices eased Wednesday when it appeared that Russia would allow Yukos to use frozen money for its operations. But the Russian Justice Ministry said yesterday that the company did not have permission to do that.

Questions over continued oil flow from Russia have become more market-rattling as worldwide demand for oil soars, driven by expanding economies such as China and India, and because most oil-producing nations are pumping at or near capacity.

The threat of political turmoil in Nigeria and Venezuela, two major oil-producing nations, as well as continuing unrest and terror attacks in Iraq and throughout the Middle East add a further "risk premium" to prices, experts say.

"What's going on here is that inventories are still low enough on a global basis and (the Organization of Petroleum Exporting Countries') spare capacity is tight enough that the markets are walking a tightrope," said Deutsche Bank AG analyst Adam Sieminski. "What everyone is afraid of is that just one more accident or sabotage or natural disaster and you are looking at $50 a barrel, if not something north of that."

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 1.74 billion shares, compared with 1.68 billion on Wednesday.