Traders work on the floor of the New York Stock Exchange (NYSE) during afternoon trading on April 02, 2024 in New York City. AFP
Analysts attributed the climb in crude to multi-month highs to headlines about Israel boosting its defenses against a potential Iran strike and sharper US criticism of Israel's handling of the Gaza war.
The Dow Jones Industrial Average finished down 1.4 percent at 38,596.98, a drop of about 825 points from its session peak.
The broad-based S&P 500 fell 1.2 percent to 5,147.21, while the tech-rich Nasdaq Composite Index sank 1.4 percent to 16,049.08.
Stocks had opened the day higher and appeared poised for a rebound after a sluggish start to the second quarter.
But the rise in oil prices in the context of worsening geopolitical tensions came in a "market that's been looking for a reason to sell off," said Art Hogan of B. Riley Financial.
Losses were broad-based with all 11 sectors of the S&P 500 in the red.
An exception was defense-related stocks such as Lockheed Martin, General Dynamics and Northrop Grumman, which advanced.
Levi Straus surged 12.4 percent after reporting better than expected results. Chief Executive Michelle Gass described the company's direct-to-consumer efforts as on track.
Ford finished 3.2 percent lower after announcing plans to ramp up investments in hybrid vehicles and pushed back production on some new larger electric vehicles to 2027 from 2025.
The move, the latest by the US carmaker to slow its EV rollout, had initially lifted shares.
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