Concerns over sharply higher energy prices pressured Wall Street as crude oil surged past $80 a barrel, resuming its early-week rally amid Middle East supply fears. Iran claimed it struck a U.S. oil tanker in the northern Persian Gulf, heightening worries of wider conflict after threats to block the Strait of Hormuz.

Defense Secretary Pete Hegseth suggested the war could last up to eight weeks, while AJ Bell's Dan Coatsworth noted oil's rapid rise is leaving investors dazed amid uncertainty over a sustained crisis or short shock. Separately, U.S. initial jobless claims held flat for the week ended February 28th, ahead of Friday's key jobs report.

Airline stocks moved sharply lower due to concerns about the impact of the Middle East conflict, dragging the NYSE Arca Airline Index down by 5.9% to a three-month closing low. Substantial weakness was also visible among gold stocks amid a decrease by the price of the precious metal, with the NYSE Arca Gold Bugs Index plunging by 4.2%. Steel, telecom, housing and biotechnology stocks also saw significant weakness, while software and oil stocks bucked the downtrend.

Asia-Pacific stocks moved mostly higher. Japan's Nikkei 225 Index shot up by 1.9%, while South Korea's Kopsi soared by 9.6%. Meanwhile, the major European markets showed significant moves to the downside on the day while the German DAX Index tumbled by 1.6%, the French CAC 40 Index and the U.K.'s FTSE 100 Index both slumped 1.5%.

In the bond market, treasuries moved notably lower, extending the downward trend seen over the past few sessions. Subsequently, the yield on the benchmark ten-year note which moves opposite of its price, surged 6.6 bps to 4.14%.