The S&P 500 was 0.5% lower in its first trading since Hamas launched a surprise attack over the weekend against Israel, which then formally declared war. The Dow Jones Industrial Average was down 137 points, or 0.4%, as of 10:50 a.m. Eastern time, and the Nasdaq composite was 0.9% lower.

The area under conflict is not home to major oil production, but fears that the fighting could spill into the politics around the crude market sent a barrel of U.S. oil up 4.2% to $86.23. Brent crude, the international standard, rose 4% to $88.00 per barrel.

One potential outcome is that the Israel-Hamas fighting could lead to a slowdown in Iranian oil exports, which have been growing this year, according to Barclays energy analyst Amarpreet Singh. Less supply of crude would raise its price, all else equal.

The conflict could also hurt the possibility of potential improvement in relations between Israel and Saudi Arabia, which is the world’s second-largest producer of oil. Traders may be taking off some bets that Saudi Arabia would be willing to raise its oil output to help secure a deal on Israel with the United States, according to Singh.

Oil prices had already been volatile leading into the weekend. A barrel of U.S. crude jumped from less than $70 during the summer to more than $90 last week, raising the pressure on inflation and the overall economy. It pulled back sharply last week before jumping again after the fighting began in Israel.

Monday’s rise in crude helped oil and gas stocks to some of Wall Street’s biggest gains. Marathon Oil rose 4.9%, and Halliburton climbed 5.9%.

Stocks of defense contractors that make weapons were also particularly strong. Northrop Grumman rose 8.7%, and Lockheed Martin gained 5.8%.

On the opposite end were companies that count fuel as among their biggest expenses. American Airlines sank 5.7%, and Norwegian Cruse Line fell 5.1%.

Major airlines have suspended flights to Israel as the U.S. State Department issued travel advisories for the region citing potential for terrorism and civil unrest.

The U.S. stock market broadly has been shaky since the end of July, buckling under the pressure of much higher yields in the bond market.

With inflation still too high for policy makers’ liking, and the U.S. economy still in solid shape, expectations have built on Wall Street that the Federal Reserve will keep its main interest rate high for longer than traders wanted.

The Fed has already hiked its overnight rate to the highest level since 2001, and it indicated last month it may cut rates next year by less than earlier expected. With the Fed also continuing to shrink its trove of bond investments, the yield on the 10-year Treasury has jumped to its highest level since 2007.

Wall Street hates higher interest rates because they knock down prices for stocks and other investments. They also make it more expensive for all kinds of companies and households to borrow money, which puts the brakes on the economy.

The main implication of such a rise is that the drag on U.S. economic growth will last longer, according to economists at Goldman Sachs. They say it could mean a hit of half a percentage point to growth next year, which they call meaningful but too small to cause a recession.

For the stock market, another risk could be that higher yields mean a reset in how much investors are willing to pay for stocks of money-losing companies, said David Mericle and Ronnie Walker. Many investors were happy to pay high prices and wait a long time for growth to come to fruition because 10-year yields were so low. Will they when they can make nearly 5%?

The 10-year yield has climbed to 4.80%, up from 3.50% during the summer and from just 0.50% early in the pandemic. Trading in the U.S. Treasury market is closed Monday for a holiday.

Reports this week on inflation at both the consumer and wholesale levels are the next big data points due before the Fed makes its next announcement on interest rates on Nov. 1.

This week will bring the unofficial start to earnings reporting season for the S&P 500, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.

In Israel, the country’s central bank said it will sell up to $30 billion in foreign exchange to prop up the shekel, whose value tumbled after the violence began. It also said it will provide up to $15 billion to support market liquidity.

The shekel was down 2.2% against the U.S. dollar and back to where it was in 2016.

Besides the U.S. dollar, another investment that usually does well in times of stress also rose. Gold added 1.1% to $1,865.40 per ounce.

In stock markets abroad, indexes were mixed across Europe and Asia. Stocks in Shanghai fell 0.4% after trading reopened following a weeklong holiday.

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AP Business Writers Matt Ott and Elaine Kurtenbach and AP Writer Jon Gambrell contributed.