The price of oil rebounded more than $2 a barrel yesterday from last week's plunge and stock prices declined slightly as optimism about the initial success of the U.S. attack on Iraq began to ebb.

Analysts said Iraq's weekend missile attacks on Israel and Saudi Arabia raised concerns in the financial markets that the defeat of Saddam Hussein's forces would not be as easy as it first appeared.

"Going into the weekend, it looked like it was going to be a short and relatively painless affair," said Michael Metz, a stock analyst at Oppenheimer & Co. in New York. "But over the weekend ... it looks like maybe Saddam Hussein is a little more cagey than we thought. Now the question is, what has he got up his sleeve? Certainly, he's not ready to capitulate by any means."

Ann-Louise Hittle, senior oil analyst at Shearson Lehman Brothers Inc. in New York, said the market "got a dose of reality. The euphoria slipped away."

The price of high-quality benchmark crude oil for February delivery, which fell as low as $18 a barrel Friday after dropping more than $10 on Thursday, closed yesterday at $21.30 on the New York Mercantile Exchange, a $2.05 increase from Friday.

The Dow Jones industrial average, which jumped more than 145 points last week, finished the day with a 17.57-point loss, at 2629.21, in light trading. "The worsening of the situation in the Persian Gulf kind of puts a psychological lid on the upside," Metz said.

{Reports that Iraqi attacks on Saudi Arabia were largely ineffective helped weaken the dollar in trading this morning in Tokyo, the Associated Press reported. Stock and oil prices rose slightly. Dealers said trading on the Tokyo Stock Exchange remained cautious as many players waited for new developments in the Persian Gulf war.}

On Wall Street yesterday, the success of high-tech weaponry such as the Patriot missile in the Persian Gulf war made big winners out of defense and technology stocks.

On the oil front, traders said many buyers seemed to be taking advantage of last week's sharp crude-price decline to get back into the market, betting that the hostilities in the Middle East will send prices up over the next few weeks despite a supply and demand picture that many analysts said indicates that the price of oil should be below $15 a barrel.

The experts also said the oil market was due for a rebound from last week's record drop. "No market can just drop $15 and just keep going down," said Andrew Lebow, an oil trader at E.D. & F. Man International Inc. in New York. "I think you have to expect some recovery, and we saw that today."

There also is some concern that a disruption to oil supplies may still lie ahead, Lebow said.

News services yesterday reported that Saudi Arabian oil output had dropped to 6.5 million barrels a day in the past week from 8.5 million barrels a day because of shipping companies' reluctance to bring tankers into the area during the fighting. However, the cutback is expected to be short-lived, and Exxon Corp., British Petroleum Co. and Royal Dutch-Shell Group were all said to have tankers loading oil at Saudi Arabia's Ras Tanura terminal yesterday.

The rise in oil prices helped drag down the stock market, analysts said.

Standard & Poor's industrial index fell 1.74 to 388.74, and S&P's 500-stock composite index was down 1.17 at 331.06. The New York Stock Exchange composite index fell 0.49 to 180.38.

The Nasdaq composite index for the over-the-counter market rose 2.71 to 379.70. At the American Stock Exchange, the market value index closed at 303.92, down .03.

Nationwide composite volume of all stocks traded on the NYSE was 165.2 million shares, more than 100 million shares below Friday's activity.

Perhaps the day's biggest winner among defense and technology stocks was Raytheon, which makes the Patriot missiles used to intercept Iraq's Scuds. It jumped 4 1/2 to 74 5/8. Among other Pentagon contractors, McDonnell Douglas gained 4 1/4 to 36, E-Systems 3 1/2 to 38 5/8, Loral 2 3/4 to 38 1/2, Northrop 1 1/4 to 20 5/8, Martin Marietta 3 5/8 to 50 and Thiokol 1 5/8 to 15 7/8.

Not all the defense contractors participated in the rally. Aircraft maker Boeing, one of Eastern Airlines largest creditors, fell 3/4 to 48 1/2. Another large Eastern creditor, General Electric, lost 1/2 to 57 3/8.

Among other losers, L.A. Gear fell 2 7/8 to 10 1/2. The sneaker and athletic wear company estimated a $4 million loss for the fourth quarter ended Nov. 30 and said it might slip into technical default on its credit line.