Stocks suffered steep losses as oil prices surged on Tuesday, renewing worries that higher fuel prices could hobble the economic recovery.

Oil rose $2.66 to settle at $99.63 a barrel amid unrest in Iran and Libya. Iran clamped down on anti-government protesters and forces loyal to Libya's leader Moammar Gadhafi launched counter-attacks against rebels expanding control over the country.

Major Market Indices

Prices jumped 13 percent last week with a rise in turmoil across North Africa and the Middle East. That pushed gas prices up 20 cents per gallon. As a result, Americans are now paying roughly $75 million more per day to fill their gas tanks than a week ago.

Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that a sustained increase in crude prices could pose a risk to the recovery. But he predicted only a temporary increase in inflation, not runaway prices. The Fed chief also said he expected the economy to grow this year, although not enough to lower the 9 percent unemployment rate.

Story: Bernanke warns recent oil price surge could impede U.S. growth

The Commerce Department reported that builders began work on fewer homes, offices and commercial projects in January. The annual rate was near its decade low, set in August.

The Dow Jones industrial average lost 168.32 points, or 1.4 percent, to 12,058.02.

The Standard & Poor's 500 index fell 20.89, or 1.6 percent, to 1,306.33. The Nasdaq composite fell 44.86, or 1.6 percent, to 2,737.41.

Three stocks fell for every one that rose on the New York Stock Exchange. Trading volume came to 1.2 billion shares.

Fifth Third Bancorp dropped 4.5 percent after the regional bank said that the Securities and Exchange Commission was investigating its accounting and reporting of commercial loans.

Natural gas driller Range Resources Corp. lost 7 percent after the company's fourth-quarter revenue figures came in below analysts' expectations. Natural gas prices have been in a slump for the past year as a result of an oversupply in the market.

AutoZone Inc. rose 2 percent after the auto-parts retailer said its second-quarter income rose 20 percent as its revenue increased.

On Monday, stable oil prices and more signs of a stronger economy helped lift. All three major stock indexes ended February higher, marking their third straight month of gains. The S&P 500 index had its best start to any year since 1998.

The Associated Press and Reuters contributed to this report.

Photos: Soaring Gas Prices

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  1. (Mike Keefe / Denver Post, Politicalcartoons.com) Back to slideshow navigation
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  1. Mike Keefe / Denver Post, Politicalcartoons.com
    Above: Slideshow (8) Soaring Gas Prices
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    Slideshow (7) Where's my job?

Chart: Dow regains 12k mark

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