Oil prices surge on Libya unrest

Oil prices rose to $95 a barrel and stocks fell about 1 percent by midday. The surge in oil prices boosted oil company stocks.

Shannon Stapleton/Reuters
A man pumps gas into his vehicle at a petrol station in New York Feb. 22, 2011. Oil prices rose to their highest level in 2-1/2 years on Tuesday as investors worried that the revolt in Libya could spread to top Middle East producers.

Stocks fell sharply and oil prices spiked as investors became worried about increasingly violent unrest in Libya.

Oil prices rose 6 percent to $95 a barrel Tuesday. The fight between protesters and forces loyal to the Libyan leader Moammar Gadhafi threatens the country's oil production. Libya is the world's 18th largest oil producer.

Oil producers rose. Chevron Corp. gained 2.5 percent. Airline stocks fell on the prospect of higher fuel costs. Delta Air Lines Inc., American Airlines parent AMR Corp., United Continental Holdings Inc. and US Airways Group Inc. all dropped by 5 percent.

The Dow Jones industrial average fell 95 points, or 0.8 percent, to 12,296 in midday trading.

The S&P 500 index fell 16, or 1.22 percent, to 1,326. The Nasdaq fell 48, or 1.7 percent, to 2,785.

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