The S&P 500 fell below 1,300, while the tech-heavy Nasdaq also more than 1 percent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, spiked more than 11 percent higher to above 22.
All key S&P 500 sectors declined, led by utilities, consumer discretionary and industrials.
London Brent crude rose to near $114 a barrel, while U.S. light sweet crude traded above $100 a barrel.
The Bank of Japan, under pressure to calm the markets, said it has supplied an additional 41 billion yen Monday to financial institutions operating in areas hit by the earthquake and Tsunami.
Japan's strongest earthquake on record shut refineries and industrial plants in the world's third-largest oil consumer. U.S. refiners, meanwhile, gained, including Tesoro, Western Refining and Frontier Oil.
Solar stocks also gained, in part because of renewed concerns over the use of nuclear power, which had been regaining popularity as a no-carbon fuel alternative. LDK Solar, First Solar and JA Solar all gained.
Expectations that proposed or planned nuclear power plans may not go foward hurt utilities, however. Entergy, which currently generates nuclear power, sank more than 4 percent, after Bank of America Merrill Lynch downgraded the utility to "underperform" from "neutral," and cut its price target to $74 a share from $78, becuase of the uncertainty of nuclear power plant approvals that are "critical to long-term earnings." Entergy will see to relicense several units in Vermont and New York over the next few years.
The brokerage also downgraded Scana to "underperform" from "neutral," saying it has a "meaningful amount of its earnings growth tied to nuclear" through the utility's 55 percent share of two new units that were to contribute "almost all its earnings growth over the next five years."
Shares of Toyota, which said it would suspend production at all its car plants until at least March 16, dropped 8 percent.(Read more: Prius Production Delays Could Curb Toyota Rebound.) Rivals Honda and Nissan also fell.