Stocks tumbled Wednesday, weighed down by an escalating crisis in Greece over new proposals to cut government spending and a surprising uptick in a key inflation gauge in the United States.

Thousands of Greeks went on a nationwide strike Wednesday, protesting the government’s proposal for spending cuts to enable the debt-ridden nation to continue receiving international bailout funds. Greek Prime Minister George Papandreou announced that he would reshuffle his cabinet Thursday and seek a vote of confidence for his new government in Parliament.

The upheaval pushed down global markets, as investors feared that the failure to approve a plan for Greece could have wide economic ramifications for the rest of Europe and the United States. Exchanges in London and France were all down more than 1 percent Wednesday.

In the United States, the Dow Jones industrial average fell 1.5 percent, or 179 points, to 11,897.27. The Nasdaq and the Standard & Poor’s 500 both tumbled 1.7 percent. Wall Street had begun to rebound from six weeks of consecutive losses earlier in the week, but on Wednesday it lost its footing.

“Worries over the Greek debt crisis is putting a lot of pressure on the market,” said Peter Cardillo, chief market economist for New York-based Avalon Partners.

A weak report on U.S. inflation also weighed on Wall Street on Wednesday. Although overall consumer prices were held down by a drop in energy prices, a key inflation figure rose more than expected, according to a Labor Department report.

The Consumer Price Index rose 0.2 percent last month on a seasonally adjusted basis, the smallest increase since November, according to Labor Department data. But excluding volatile food and fuel prices, core consumer prices rose 0.3 percent — the largest increase since July 2008.

“Today’s report provides further evidence of persistent price increases across a broad range of goods and services,” Sam Bullard, a Wells Fargo senior economist, said in a research note.

Fueling the upswing were apparel, shelter, new vehicle and recreation costs, the Labor Department report said. But those increases are likely to be temporary, analysts said. Car dealers, for example, have raised prices in anticipation of vehicle shortages caused by a slowdown in Japanese production since the earthquake-tsunami, they said. Prices will probably fall again as inventory levels rise, analysts said.

“The upshot is that, while the bigger monthly rise in core prices is a concern, a lot of it was due to temporary factors that could be reversed in the next few months,” said Paul Ashworth, chief U.S. economist for Capital Economics.

Investor fears spread to currency and bond markets. The dollar strengthened against the euro, generally a reflection of investors looking for safety from market volatility. The price of government bonds rose as investor demand increased. The yield on the 10-year Treasury bond, for example, fell to 2.97 percent from 3.10 percent, reflecting that investors were asking for less in interest payments in return for loaning the government money. Meanwhile, crude oil prices fell 4 percent, to about $95 a barrel.

And in another measure of investor anxiety, the Chicago Board Options Exchange’s Volatility Index, known as VIX or the “fear gauge,” rose 16 percent.

Some economists were also concerned by the paltry 0.1 percent increase in industrial production last month, the second consecutive month with little or no gain, according to a Federal Reserve report. Still, the sluggish growth was mostly related to a decline in the utilities sector, which was affected by seasonally mild weather last month, analysts said. The report showed a 0.4 percent increase in manufacturing last month.