Crude oil prices shot up more than $2.50 a barrel yesterday, breaking the $31 level for the first time in nearly five years.

The surge came in increasingly frantic and nervous trading fed by growing futures-market fears that hostilities are on the verge of breaking out in the Middle East, potentially endangering much of the world's oil supply.

The effects of the jump in oil prices rippled quickly through other financial markets. At the New York Stock Exchange, the Dow Jones industrial average tumbled 43.81 points to 2560.15, its lowest close since Jan. 30, and broader market indexes were down even more. Bond prices also were lower: Yields on long-term government bonds exceeded 9 percent for the first time since early May.

Oil analysts and traders said the price of crude was pushed upward by news that President Bush had activated military reserves, that Jordan had closed its border with Iraq and that Saudi Arabia had suspended most of its exports of refined petroleum. Reports of war talk in the Iraqi press and Iraqi charges that Saudi Arabian aircraft had entered its airspace circulated among traders, adding to their jitters.

But the experts said those developments were not enough to justify yesterday's rapid increase, and they suggested that the huge price rise demonstrated that the psychology of fear is having a powerful effect on the highly volatile oil markets.

"It's a bull market, and a bull market has almost its own momentum," said John Lichtblau, executive director of the Petroleum Industry Research Foundation in New York. "It's psychology and speculation and sort of an assumption that things are going to get worse. And maybe they will."

"As the day wore on, you had increasing concern," said Michael McDermott, an oil trader at PaineWebber Inc. in New York. "It appeared that this standoff that you presently have may go to a military confrontation -- a shooting war -- in the near future. ... The underlying concern is that there is going to be a disruption of major proportions."

The price of crude oil closed at $31.22 on the New York Mercantile Exchange, a $2.51 increase. It was the highest price for crude since October 1985. The price has almost doubled since early July.

Oil traders said price increases came in waves yesterday as each tidbit of news hit the market, beginning with a report that Saudi Arabia was cutting exports of diesel fuel and other products to Japan and other markets because of demands for the fuels created by the huge buildup of American troops in the nation. The loss of the Saudi supply of roughly 100,000 barrels a day is expected to tighten supplies of diesel fuel and other products around the world, putting more pressure on prices.

The reports of the Saudi cutback sent prices up nearly $1 shortly after the market opened, and the day's other news followed quickly, creating a crescendo in trading.

"Late in the day, crude really seemed to accelerate," said Tom Bentz, trading director at United Energy Inc., a New York trading firm. "We didn't slow down much at all."

In and of themselves, the developments in the Middle East wouldn't be enough to significantly move the markets, analysts said. But given the nervousness that war in the region is imminent, the market is extremely sensitive -- so much so that it seems to have ignored the decisions by the Saudis and other members of the Organization of Petroleum Exporting Countries to increase their oil production to make up for the 4.5 million barrels a day lost when Iraq invaded Kuwait on Aug. 2.

Experts said the markets are gripped by fear that a military confrontation between the United States and Iraq could lead to damage to the Saudi oil fields, which could create major oil shortages and cause even larger price increases.

"If for some reason any Saudi Arabian field is damaged by military attack, you could have the oil crisis of the century," Lichtblau said. "That is the fear."

However, he added, "The fear should be no greater than it was two or three days ago. ... The traders are all thinking of it as an upward-bound market because the traders all see the situation in the Middle East as deteriorating. Whether it is or not, the traders don't know."