* Indexes down: Dow 0.73%, S&P 500 0.58%, Nasdaq 0.61%

* Airline and financial stocks take a hit, defense stocks

rise

* Investors turn to safe havens, including precious

metals, dollar

* BlackRock ( BLK )-led consortium to acquire AES Corp ( AES ) for $33.4

billion

(Updates after markets open)

By Johann M Cherian and Ragini Mathur

March 2 (Reuters) - Wall Street's main indexes were

lower on Monday as investors braced for a prolonged Middle East

conflict that threatened to disrupt global trade routes and

reignite inflationary pressures.

Sectors that were hit the most included airlines, as a

number of carriers halted flights, while several oil and gas

facilities in the Middle East stopped production, which pushed

crude prices up over 8%.

That painted an overall cloudy outlook for the global

economy and also weighed on financial stocks.

Delta and United Airlines tumbled over 3%

each.

The S&P 500 financial index was down 1% with big

banks such as Bank of America ( BAC ) and Citigroup ( C )

trading lower.

Investors instead flocked to traditional safe havens such as

the dollar. Higher precious metals prices helped miners

such as Kinross Gold and Harmony Gold add 1%

each.

Defense stocks also got a boost, with Lockheed Martin ( LMT )

and RTX gaining over 3% each, while Kratos

rose 9% and AeroVironment ( AVAV ) was up 19%.

After coordinated U.S. and Israeli strikes on Iran over the

weekend killed Tehran's Supreme Leader, Israel launched

retaliatory attacks following air strikes by Iran and Hezbollah

militants in Lebanon, deepening fears that the conflict could

widen further across the region.

President Donald Trump suggested that strikes on Iran could

go on for the next four weeks.

Adam Turnquist, chief technical strategist for LPL

Financial, said that market losses were contained as investors

had been anticipating a conflict over the past few weeks.

"The market is taking it relatively well just given where

oil is and the likelihood this is going to play out for four

weeks - it's not another weekend event."

At 09:52 a.m. ET, the Dow Jones Industrial Average

fell 355.68 points, or 0.73%, to 48,622.24, the S&P 500

lost 40.14 points, or 0.58%, to 6,838.74 and the Nasdaq

Composite lost 139.42 points, or 0.61%, to 22,528.79.

The S&P 500 and the Nasdaq briefly touched their lowest

levels in about two weeks earlier in the session but recouped

losses on a 1.7% gain in the energy sector. All other

major sectors on the S&P 500 traded in the red.

Wall Street's fear gauge, the CBOE VIX, jumped 3.1

points to a three-month high of 21.96.

The escalation comes at a precarious moment for markets

already rattled by AI disruption concerns, private credit

jitters and trade policy uncertainty - factors that drove the

S&P 500 and the Nasdaq to their steepest monthly declines since

March 2025.

A sustained oil price spike threatens to amplify

inflationary pressures just as U.S. tariffs push prices higher,

data showed on Friday.

Wells Fargo's Ohsung Kwon warned the S&P 500 could fall to

6,000 points, nearly 13% below its last close, if crude

surpasses $100 per barrel, with earnings potentially taking a

1.3% hit.

Oil companies Occidental Petroleum ( OXY ) gained 2.5% and

ConocoPhillips ( COP ) added 4%, while crude-price-sensitive

cruise stocks Carnival and Norwegian Cruise

fell over 10% each.

Separately, Norwegian Cruise forecast annual profit below

Wall Street expectations.

A consortium led by BlackRock ( BLK )-owned Global

Infrastructure Partners and equity firm EQT AB agreed

to acquire AES Corp ( AES ) for $33.4 billion, including debt.

However, the utilities company's shares fell 16.3% as the

offer was at a 13% discount to the last close.

On the data front, investor focus will shift to a key

non-farm payrolls report later in the week.

Declining issues outnumbered advancers by a 2.92-to-1 ratio

on the NYSE and by a 2.58-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and three new lows,

while the Nasdaq Composite recorded 51 new highs and 120 new

lows.