(Updates with closing moves)

* Indexes down: Dow 1.01%, S&P 500 1.74%, Nasdaq 2.38%

* Meta Platforms ( META ), Alphabet fall after US jury verdict

* OECD warns Iran war erases global growth upgrade

* Weekly jobless claims in line with estimates

By Sinéad Carew and Twesha Dikshit

March 26 (Reuters) - The Nasdaq tumbled more than 2% to

confirm a correction on Thursday while the S&P 500 and the Dow

fell more than 1%. Investors scrambled for safety on fears of

escalation in the U.S.-Israeli war against Iran, which has sent

oil prices soaring and exacerbated inflation concerns.

Thursday marked the biggest one-day decline for the Nasdaq

and the S&P 500 since January 20.

President ​Donald Trump said Iran must make a deal with the

U.S. or face a continued onslaught, while warning that taking

control of Iran's oil was an option. A senior Iranian official

told Reuters the U.S. proposal for ending nearly four weeks of

fighting is "one-sided and unfair," while stressing that

diplomacy had not ended.

Stock futures pared losses slightly after the market closed when

Trump said he was pausing attacks on Iran's energy plants for 10

days until April 6 at the Iranian government's request. He said

talks with Tehran were going "very well."

Earlier, the lack of any clear signs of progress sent oil

prices soaring, with U.S. crude futures settling up 4.6%

compared with a 5.7% advance for Brent futures.

As a result, stock indexes erased gains from Wednesday when

investors had been betting on a de-escalation in the war, which

has disrupted oil shipments through the Strait of Hormuz.

'FOG OF WAR'

"The back and forth seems to be happening at a quicker pace.

On top of it, we don't know who Trump is negotiating with," said

Doug Beath, global equity strategist at Wells Fargo Investment

Institute, adding that uncertainty about the war was causing

investors to sell equities. "There's a lot of conflicting

signals, and it's really the fog of war, the uncertainty of all

of it that's driving this."

The Dow Jones Industrial Average fell 469.38 points,

or 1.01%, to 45,960.11, the S&P 500 lost 114.74 points,

or 1.74%, to 6,477.16 and the Nasdaq Composite

shed 521.74 points, or 2.38%, to 21,408.08.

The technology-heavy Nasdaq closed down 10.7% from its October

29 closing record high, confirming it has been in a correction

since that date. A correction is a decline of 10% or more from a

recent market high.

Noting that stock markets have generally been weaker on

Fridays since the Iran war began a month ago, Peter Tuz,

president of Chase Investment Counsel, said the S&P 500 could

follow the Nasdaq in confirming a correction.

"After three good years for markets, a selloff of 10%-20%

should not surprise anyone. We had one last year during the

tariff proposals. Bad technical indicators might, however,

encourage selling and discourage buying until the situation

clears up," Tuz said.

Most of the S&P 500's 11 major industry sectors lost ground.

Energy was the biggest gainer, adding 1.6%. The only

other sector to show a percentage gain was defensive utilities

, which added 0.2%.

The biggest sector laggards were communications services

, down 3.5%, and technology, which lost

2.7%.

META, ALPHABET DROP AFTER VERDICTS

The communications index was under pressure after jurors found

Meta and Alphabet's Google liable in the

first two trials from a growing wave of lawsuits accusing social

media firms of harming children. Meta shares finished close to

8% lower while Alphabet lost more than 3%.

In technology, chip stocks were a big drag with the

Philadelphia Semiconductor Index tumbling 4.8% after

three sessions of gains. Leading declines in the Dow were shares

of artificial intelligence chip leader Nvidia ( NVDA ), which

finished down more than 4%.

Earlier on Thursday, the OECD warned the Middle East conflict

has knocked the global economy off a stronger growth path, with

the near-closure of the Strait of Hormuz threatening to push

inflation sharply higher.

With high oil prices fanning inflation fears, central banks

are in a tough spot regarding interest rates, with traders no

longer pricing in any easing from the U.S. Federal Reserve this

year. Two rate cuts had been expected before the Iran conflict

erupted, according to the CME Group's FedWatch Tool.

Earlier, data showed new applications for U.S. unemployment

benefits rose slightly last week, suggesting a stable labor

market and giving the Fed scope to hold rates steady while

monitoring the impact of the Iran war.

U.S.-listed shares of gold miners, including Sibanye Stillwater

and Harmony Gold, fell more than 4% as bullion

prices lost more than 2%.

Declining issues outnumbered advancers by a 3.16-to-1 ratio

on the NYSE, where there were 121 new highs and 202 new lows. On

the Nasdaq, 1,385 stocks rose and 3,423 fell as declining issues

outnumbered advancers by a 2.47-to-1 ratio. The S&P 500

posted 20 new 52-week highs and eight new lows.

Volume was light, with 16.50 billion shares changing hands

on U.S. exchanges compared with the 20.54 billion average for

the last 20 sessions.