(Updates prices to afternoon)

* Indexes down: Dow 0.92%, S&P 500 1.50%, Nasdaq 2.07%

* 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) - Wall Street's main indexes fell

sharply on Thursday as investors worried about escalation in the

U.S.-Israeli war against Iran, which has sent oil prices soaring

and exacerbated inflation concerns.

U.S. President ​Donald Trump said Iran must make a deal or face

a continued onslaught. But 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.

The lack of clear signs of progress sent oil prices up more

than 5%. As a result, stock indexes erased their gains from the

prior session when investors had been betting on a de-escalation

in the four-week war.

'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."

At 2:20 p.m. ET (1820 GMT), the Dow Jones Industrial Average

fell 428.89 points, or 0.92%, to 46,000.14, the S&P 500

lost 98.72 points, or 1.50%, to 6,493.18 and the Nasdaq

Composite lost 455.11 points, or 2.07%, to 21,474.71.

The Nasdaq was down more than 10% from its October 29

closing record high, putting it on track to confirm a

correction.

Among the S&P 500's 11 major industry sectors, only four

were advancing. Energy was the biggest gainer while

communications services and technology were

the biggest decliners.

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 were down almost 8%

while Alphabet lost 3%.

In technology, chip stocks were a big drag with the

Philadelphia Semiconductor Index down more than 4% after

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

of artificial intelligence chip leader Nvidia ( NVDA ), which

was down 3.7%.

The conflict in the Middle East has knocked the global economy

off a stronger growth path, the OECD warned on Thursday, 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.

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.

Among individual movers, shares of Olaplex ( OLPX ) jumped 50%

to $2 after Germany's Henkel agreed to buy the

hair-care brand in a $1.4 billion deal.

U.S.-listed shares of gold miners slipped as bullion prices

declined more than 1%. Sibanye Stillwater and

Harmony Gold fell more than 3%.

Declining issues outnumbered advancers by a 2.88-to-1 ratio

on the NYSE, where there were 111 new highs and 143 new lows. On

the Nasdaq, 1,451 stocks rose and 3,175 fell as declining issues

outnumbered advancers by a 2.19-to-1 ratio. The S&P 500

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