Iraq substantially reduced its oil shipments through Turkey yesterday, shifting the focus of the Gulf oil crisis to Saudi Arabia, the major remaining outlet for Iraq's petroleum production.

The move by Iraq confronts Saudi Arabia's King Fahd with a decision on whether to comply with a U.N. resolution forbidding the shipment of Iraqi oil through Saudi pipelines. Moving a step ahead of the United Nations action and the arrival of an international naval flotilla, Iraq informed Turkey's state-run pipeline company yesterday that one of the two pipelines that carry Baghdad's oil to shipping terminals in the Mediterranean would be closed for "marketing" reasons.

As tensions increased dramatically over the Persian Gulf, financial markets registered their worst day since the crisis began. Stock prices tumbled, with the Dow Jones industrial average dropping 93.31 points following similar declines in markets all around the world earlier in the day. {See story on Page C1.}

"Everything went wrong today. The prospect of some stabilization of the situation in the Middle East diminished. There's a feeling that {President} Bush will respond militarily," said Byron R. Wien, chief U.S. investment strategist for the investment banking firm Morgan Stanley.

Oil prices continued their rapid rise as concerns mounted that the world might face a shortage in the near future. Between them, Iraq and Kuwait have been supplying 4 million to 5 million barrels of oil daily to the world's markets, and oil industry executives and analysts said it likely would be very difficult -- for political, logistical and technical reasons -- to increase oil production elsewhere in the world enough to cover the loss.

The price of a benchmark barrel of crude oil jumped $3.56 on the New York Mercantile Exchange yesterday, to $28.05, the highest level in five years. Just a few weeks ago, the market price of the same oil was less than $16 a barrel.

With the price of gasoline at service stations moving higher, White House spokesman Marlin Fitzwater urged oil companies and suppliers to use restraint, while some Democrats in Congress accused the companies of "profiteering."

Pan American World Airways, meanwhile, joined Northwest Airlines in raising fares to cover the cost of higher jet-fuel prices. An exception to the trend was USAir, which said it would not match the fare increases. "The fuel situation is too volatile," a spokeswoman for the Arlington-based airline said, adding that the company will continue to monitor the situation.

Kuwait's oil fields were shut down last week after that nation was invaded by Iraq, precipitating the crisis, and Iraqi production now is feeling the pressure of an international boycott that has been led by the United States.

Unless the situation is defused soon, experts said, shortages will put additional upward pressure on already spiraling oil prices, greatly increasing the chances for severe economic consequences around the world.

Analysts said the price of oil is likely to continue to rise if Iraqi and Kuwaiti oil is removed from world supplies and not replaced. Between them, the two nations account for nearly 10 percent of the non-communist world's oil production.

"If you take that oil out permanently, you're going to see the price of oil go through the roof," said Rosario Ilacqua, an oil industry analyst for Rothschild Inc., a New York securities firm.

"The irony is, the more effective the embargo is, the more likely it is that you're going to create some economic dislocations around the free world," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation, a New York think tank partly funded by the oil industry. "An embargo is the right thing, but in doing the right thing we effectively hurt ourselves."

The embargo against Iraqi oil picked up considerable speed yesterday as more nations joined the United States, Japan and European countries. The United Nations Security Council voted 13-0 to approve sweeping sanctions against Iraq, including a ban on oil purchases.

Amid growing speculation that the United States would back up the boycott of Iraq with military muscle, the United States and several other nations began moving warships into place near points where Iraqi crude is loaded onto tankers.

Iraqi oil is shipped out of the virtually landlocked country by two pipeline systems, one that runs through Turkey to a terminal at Ceyhan on the Mediterranean, the other through Saudi Arabia to al-Muajjiz, a port on the Red Sea just south of the Saudi oil terminus of Yanbu. Some Iraqi oil is also shipped out of the nation through the Strait of Hormuz. All three points can be blockaded by military vessels.

Major oil companies said they were going along with the embargo by not picking up scheduled cargoes of Iraqi crude. "We have ships at the Turkish outlet. They are not loading. We are abiding by the terms and conditions of the president's order," said a spokesman for Exxon Corp., the largest American buyer of Iraqi oil.

Reportedly, there is pressure on the Saudi and Turkish governments to shut down the pipelines from Iraq, something that might happen naturally if there are no customers for it.

"When the tank at the other end of the pipeline fills up with oil ... you can't fill it up any more," said Bruce Lazier, an oil industry analyst for Prescott, Ball and Turben in New York. "The fact is that the tankers aren't {loading} the oil. ... You can't ship oil through a pipeline if all you can do is pump it into the ocean at the other end."

The Associated Press, quoting a Turkish official, reported that Iraq shut down one pipeline and reduced shipments through the other after several tankers that had been waiting in Ceyhan to be loaded sailed away in accordance with the embargo.

The Turkish pipelines are Iraq's main means of exporting oil, with a daily capacity of 1.65 million barrels, well over half of Iraq's exports. Turkey -- which itself is one of Iraq's biggest customers -- told fellow members of NATO in Brussels yesterday that it was considering agreeing to a U.S. request to cut one of the pipelines. But an Iraqi official warned against such a move.

Despite the nervousness on world oil markets, analysts say there is enough surplus in world oil inventories to cover the loss of Iraqi and Kuwaiti oil for the short term. Strategic petroleum reserves -- oil stored by the United States, Japan and European nations in recent years to cover a crisis like this one -- also could help alleviate a short-term squeeze.

For the long run, there is theoretically enough unused oil production capacity in the world to make up for the embargoed oil.

Estimates differ, but the consensus is that there is about 5.5 million barrels a day of unused crude production capacity scattered around the world, enough to provide a slim, somewhat uncomfortable margin over the missing production from Iraq and Kuwait.

But most of the extra supply capability is in Saudi Arabia -- the Middle East's biggest oil producer -- and the United Arab Emirates, the two nations that may have the most to lose by angering Iraq. Saddam Hussein, Iraq's president, has been menacing the Emirates for some time, and his conquest of Kuwait puts his troops within easy striking distance of neighboring Saudi Arabia's rich oil fields.

Saudi Arabia is believed to be able to increase its oil production by about 2.5 million barrels a day, while the UAE has nearly 1 million barrels of extra capacity. Nigeria and Venezuela also are believed to have several hundred thousand barrels each of extra production ability.

"Presumably, {the shortfall in supply} could be made up relatively easily on the part of the Saudis and the Emirates and others if -- and this is the big if -- they are willing to make it up," said William Hermann, chief economist for oil giant Chevron Corp. in San Francisco.

But most experts believe that Saudi Arabia and the UAE would be unlikely to raise production much for fear of provoking Saddam.

"Can we lean on the Saudis to bring on more production?" asked Ilacqua. "I think the Saudis are petrified."

Most analysts said the Saudis would be unlikely to increase production without military backing from the United States.

MOVING IRAQI OIL

Before the invasion of Kuwait, Iraq exported about 2.5 million barrels of oil a day:

--1 million via Turkish pipelines to the Mediterranean

--1 million via Saudi Arabian pipeline to the Red Sea

--500,000 via tankers loaded at Iraq's Mina al-Bakr terminal in the Persian Gulf.

IRAQ'S FOREIGN TRADE

Oil is Iraq's major product, accounting for about 95 percent of its $12.4 billion in exports in 1988. The only other significant product is dates. Iraq imported about $13 billion worth of food, industrial goods and consumer goods in 1988. It bought most of these goods from Turkey, the United States, West Germany, the United Kingdom, France, Japan, Italy, the USSR and various Eastern Bloc nations.

THE TURKISH PIPELINES

Iraq has stopped the flow of oil in one of its two pipelines in Turkey and reduced flow in the other to 70 percent of capacity, according to Turkish officials.

THE SEA ROUTE

Some Iraqi oil -- 500,000 barrels a day, including refined products -- is shipped out of the Persian Gulf via the Straits of Hormuz. The straits have become difficult to traverse because of wreckage and mines left over from the Iran-Iraq war. The American, French and British navies all maintain ships in the nearby Indian Ocean.

ACTIONS AGAINST IRAQ

The United States, the 12-nation European Economic Community, Japan and Canada banned oil purchases. The Soviets, French and Chinese -- Iraq's main arms suppliers -- promised not to send weapons. The United States, Britain and Japan banned food shipments and froze Kuwait's assets to keep them from Iraq. Japan, one of Iraq's main bankers, also suspended lending.

KUWAITI OIL

Kuwait produced about 1.5 million barrels a day before the invasion. Iraq and Kuwait together accounted for 20 percent of OPEC production.

PUMPING MORE OIL

Experts estimate that there is potentially 5.5 million barrels per day of excess oil-producing capacity in the world, most of it in Saudi Arabia (more than 2 million barrels) and the United Arab Emirates (about 1 million barrels). The rest is scattered around the world.

SOURCES: Associated Press, Central Intelligence Agency, Middle East Economic Survey, Petroleum Industry Research Foundation