NEW YORK — U.S. stocks retreated from their records Tuesday after Iran fired missiles into Israel, a sharp escalation of tensions in the Middle East that investors fear could lead to disruptions in the flow of oil.

The S&P 500 pulled 0.9% lower, and the Dow Jones Industrial Average lost 173 points, or 0.4%, after both had set all-time highs the day before. The Nasdaq composite dropped 1.5% after paring a bigger loss from earlier in the day, like other indexes.

Oil prices jumped amid speculation about how Israel and the United States may respond to Iran’s move. White House National Security Adviser Jake Sullivan called Iran’s missile attack a “significant escalation,” although he said it was ultimately “defeated and ineffective.”

While Israel is not a major producer of oil, Iran is, and the potential for a wider conflict could affect other, neighboring producers of crude. The price for a barrel of benchmark U.S. crude rose 2.4% to settle at $69.83. Brent crude, the international standard, rallied 2.6% to $73.56 per barrel.

That in turn sent shares of oil-and-gas producers to some of the stock market’s biggest gains. ConocoPhillips rose 3.9%, and Exxon Mobil climbed 2.3%.

Shares of defense contractors also rallied. Northrop Grumman rose 3%, and RTX added 2.7%. RTX partners with Israeli company Rafael Advanced Defense Systems to make the “Iron Dome” air defense system that Israel’s government uses.

The majority of U.S. stocks, though, sank. The two biggest stocks in the market, Apple and Microsoft, both fell at least 2.2%, while the smallest U.S. stocks that make up the Russell 2000 index dropped 1.5%.

“Stocks are vulnerable as we are at all-time highs, and valuations are stretched prior to the election,” according to Jay Hatfield, CEO at Infrastructure Capital Advisors.

All told, the S&P 500 fell 53.73 points to 5,708.75. The Dow dropped 173.18 to 42,156.97, and the Nasdaq composite lost 278.81 to 17,910.36.

The all-time high that the S&P 500 set on Monday was its 43rd of the year so far. Stocks had been jumping on hopes the U.S. economy can continue to grow despite a slowdown in the job market, as the Federal Reserve cuts interest rates to give it more juice. The Fed last month lowered its main interest rate for the first time in more than four years, and it’s indicated it will deliver more cuts through next year.

The dominant question hanging over Wall Street is whether the cuts will ultimately prove to be too little, too late after the Fed earlier kept rates at a two-decade high in hopes of braking on the economy enough to stamp out high inflation.

A discouraging report arrived Tuesday, showing U.S. manufacturing weakened by more in September than economists expected. Manufacturing has been one of the areas of the economy hurt most by high interest rates, and the report from the Institute for Supply Management said demand continues to slow.

A separate report was potentially more encouraging. It showed U.S. employers were advertising more than 8 million job openings at the end of August.