June 15, 2011 -- The price of oil dropped to a four-month low while U.S. stocks took a dive today upon news that Greece is inching closer to defaulting on its debt, causing fears of financial effects in Europe, if not the rest of the world.
Oil futures settled at $94.81, according to the New York Mercantile Exchange, the lowest since Feb. 22. Oil ended Tuesday at $99.37.
The major indexes had their biggest drops since June 1, according to the Associated Press.
The Dow Jones industrial average dropped about 178 points to 11,897.27, a three-month low, at the close. The S&P 500 dropped about 22 points to 1,265.42 while the NASDAQ fell 47 points to 2,631.46.
Fear of instability from Europe deepened upon reports that Greek Prime Minister George Papandreou said he would be willing to resign and form a unity government. European leaders have failed to agree on an aid package for the debt-ridden country. The proposed budget cuts have led thousands of Greek workers to protest around the Parliament in Athens.
"The biggest problem is the Greek problem, which is more of an issue for Europe than America. Europe has handled that crisis very badly," said Steven Leslie, lead financial services analyst with the Economist Intelligence Unit. "It's a small country, but a crisis like that might spread to other countries in the euro zone."
Leslie said the current crisis in Greece may be evidence that the austerity measures and rescue last spring have failed.
"There's fear that Portugal and Ireland might face the same danger," he said.
Though the U.S. may not be directly affected by the debt crisis, Leslie said flat or gloomy economic data this week that pointed to a slow recovery in the U.S. also contributed to the lower close in the markets today.
On Tuesday, economists learned consumer spending slipped in May, according to retail sales, which decreased 0.2 percent. Today the Bureau of Labor Statistics reported that the consumer price index in May grew at 0.2 percent, which was higher than the expectation of no change.
"U.S. economic prospects certainly aren't rosy," Leslie said. "In absence of default of U.S. debt, U.S. prospects seem reasonable. We don't see double-dip recession or surging inflation, for that matter."