A worldwide sell-off for stocks is slamming onto Wall Street on Tuesday, and oil prices are leaping even higher, as worries rise that the war with Iran is widening and may do more sustained damage to the global economy than feared.

The S&P 500 dropped 1.8 per cent in early trading. The Dow Jones Industrial Average was down 907 points, or 1.9 per cent, as of 9:35 a.m. ET, and the Nasdaq composite was 2.1 per cent lower. The S&P/TSX Composite was down more than 1,000 points in early trading.

It was just a day ago that U.S. stocks opened with sharp losses, only to recover all of them and end the day with slight gains. But that was with the caveat that oil prices did not jump too high, like to more than $100 US per barrel.

On Tuesday, oil prices got closer to that mark and raised more alarms. The price for a barrel of Brent crude, the international standard, leaped another 8.2 per cent to $84.14. It was sitting near $70 less than a week ago. A barrel of benchmark U.S. crude, meanwhile, rose eight per cent to $76.92.

Oil prices made the leap as Iran struck the U.S. embassy in Saudi Arabia, part of a widening of targets that also includes areas critical to the world’s oil and natural gas production. Worries are particularly high about what will happen to the Strait of Hormuz off the coast of Iran, a narrow passageway where roughly a fifth of the world’s oil passes.

Making things uncertain for markets are rising questions about how long this war may continue.

Strikes by the United States and Israel have already killed Iranian Supreme Leader Ayatollah Ali Khamenei, but President Donald Trump has suggested that fighting may continue for weeks.

Late Monday night, Trump said on his social media network, “Wars can be fought ‘forever,’ and very successfully” with the supply of munitions that the United States possesses.

The jump in oil prices will worsen inflation and put more pressure on U.S. households and businesses by raising bills for gasoline and to ship products. The average price for a gallon of gasoline in the U.S. jumped 11 cents overnight to about $3.11 US, according to data from motor club AAA.

That has the damage in stock markets so far centering on companies and countries that use a lot of oil, natural gas and other petroleum-based fuels.

Asian markets down, airline stocks sink

In South Korea, a big energy importer, the Kospi stock index plunged 7.2 per cent for its worst day since two summers ago. It had been setting records recently.

Japan’s Nikkei 225 dropped 3.1 per cent, even as analysts say Japan has a sizable stockpile of energy lasting more than 200 days.

On Wall Street, airlines continued to sink on worries about rising fuel bills. The war has also led to cancelled flights and stranded passengers. United Airlines fell 4.1 per cent, American Airlines sank four per cent and Delta Air Lines dropped three per cent.

In the bond market, Treasury yields climbed more as worries rose further about inflation worsening. The yield on the 10-year Treasury jumped to 4.10 per cent from 4.05 per cent late Monday and from just 3.97 per cent on Friday.

Higher yields can mean more expensive loans for U.S. households and businesses, for everything from mortgages to bond issuances.