By Edward Krudy
NEW YORK (Reuters) - Wall Street fell on Tuesday as unrest in oil exporter Libya prompted investors to shun riskier assets such as stocks.
Oil prices hit a 2-1/2 year high on concerns the unrest could disrupt supplies from the Middle East. NYMEX crude oil futures jumped 5.8 percent to over $94 per barrel.
Higher oil prices hit the wider market on concerns of higher fuel costs. The Arca airline index fell 5.3 percent, with Delta Air Lines Inc down 7.6 percent to $10.62.
Still, optimism about the U.S. recovery appeared in a report that showed consumer confidence rose in February to a three-year high.
"If these oil prices stay elevated with the ongoing difficulties in the Middle East, this (consumer confidence) number will start to sink back down again," said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
The Dow Jones industrial average dropped 142.81 points, or 1.15 percent, to 12,248.44. The Standard & Poor's 500 Index dropped 22.32 points, or 1.66 percent, to 1,320.69. The Nasdaq Composite Index dropped 62.07 points, or 2.19 percent, to 2,771.88.
Libyan leader Muammar Gaddafi used tanks, helicopters and warplanes to quell a growing revolt and scoffed at reports he was fleeing after four decades in power.
The CBOE Volatility Index, Wall Street's so-called fear gauge, rose 25 percent to 20.62.
U.S. consumer confidence rose in February to a three-year high on improved optimism about the economy and income prospects, according to the Conference Board, a private group.
"Just as we showed incredible resilience with Egypt, we continue to look inward and get excited about the recovery going on within our borders," said Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Oklahoma.
Shares of Wal-Mart Stores Inc fell 3.2 percent to $53.62 after the world's largest retailer posted its seventh straight drop in U.S. sales.
(Additional reporting by Ryan Vlastelica and Caroline Valetkevitch; Editing by Kenneth Barry)
