Stocks plunged Friday, sending the Dow Jones industrials down nearly 400 points, after oil prices shot up by more than $11 a barrel and neared $140 a barrel — and wiped out investors’ recent optimism about the economy in the process.

The prospect of higher energy prices that could hobble consumers and worsen a slowing economy had investors frenetically pulling money out of stocks. The bad news about rising energy prices compounded investors’ anxiety over a worrisome reading on unemployment, which for May showed its biggest monthly rise since 1986.

The decline in stocks also helped drive bond prices sharply higher as investors sought a more secure place for their money.

Crude oil has seen a huge rebound this week after falling amid a drop in demand for gasoline. The jump continued Friday; light, sweet crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after settling at $138.54, a gain of $10.75 in the regular session. The surge followed a Morgan Stanley analyst’s prediction that crude would reach $150 a barrel by July 4; a decline in the dollar and fresh tensions in the Middle East added to crude’s advance.

Oil investors’ frantic buying of crude futures made it clear that the market could make the Morgan Stanley prediction a reality. And on Wall Street, crude’s soaring price intensified worries that ever-expensive fuel will lead consumers to curtail their spending on nonessentials. With gasoline at the threshold of a national average of $4 a gallon, crude’s surge higher is expected to propel gas even higher — and make Americans even more reluctant to spend.

Moreover, the spike in energy prices came as the Labor Department said the nation’s unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.

The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace given that May marked the fifth straight month of jobs losses.

Still, the sudden rise in oil prices appeared to weigh most heavily on Wall Street. The jump in oil also came after an Israeli Cabinet minister hoping to replace Prime Minister Ehud Olmert was quoted as saying Israel would attack Iran if it doesn’t abandon its nuclear program.

“I think the biggest concern right now is oil and it’s potential for a stagflationary environment,” said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management. Stagflation occurs when stalling growth accompanies rising prices.

According to preliminary calculations, the Dow Jones industrial average fell 394.64, or 3.13 percent, to 12,209.81. It was the worst percentage and point drop since Feb. 27, 2007, when the blue chips dropped 416.02 points, or 3.29 percent, as concerns emerged about troubles in the credit market and an economic slowdown.

Broader stock indicators also fell sharply. The Standard & Poor’s 500 index lost 43.37, or 3.09 percent, to 1,360.68., and the Nasdaq composite index fell 75.38, or 2.96 percent, to 2,474.56.

Friday’s pullback came a day after the Dow jumped nearly 214 points, its largest daily point gain since April 18 and a reacation to better-than-expected sales from retailers and a dip in weekly jobless claims. The welcome economic news helped investors shrug off a more than $5-a-barrel spike in oil prices. But the advance in oil Friday made it clear to Wall Street that oil posed a serious threat to consumer spending and the economy.

Friday’s session punctuated an erratic week for the markets. Stocks fell Monday and Tuesday before moving sideways Wednesday and surging Thursday. The back-and-forth moves left the Dow down 3.39 percent for the week, the S&P 500 off 2.83 percent and the Nasdaq with a loss of 1.91 percent.

Bond prices jumped Friday after the weak jobs data sent investors scurrying for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 4.04 percent late Wednesday.

The dollar declined against other major currencies — a move that makes each barrel of oil more expensive. Gold prices rose.

Mr. Knapp said the stock market’s losses from the jump in oil and the jobs report Friday, while steep, were somewhat more orderly than they might have been, say, in March when fears of a collapse in the banking system batted investors. He contends at least some investors are remaining cool because they believe some of rise in oil is unreasonable.

“The supply demand dynamics just don’t warrant where we are today. It’s becoming incredibly hackneyed to say it’s all coming from demand in China,” he said. “I think the consensus is that something is going to come along to deflate this commodity bubble and put the stock market back on track.”

And worries about employment and oil may be intertwined.

Ethan Harris, Lehman Brothers’ chief U.S. economist, contends that the employment report helped drive oil prices higher. He said traders are worried that the spike in unemployment would leave the Federal Reserve unwilling to raise interest rates. A notion of a Fed with few options combined with comments from the European Central Bank this week on the possibility of raising rates have hurt the dollar.

“The weaker dollar is pushing up oil prices because oil is denominated in dollars and oil sellers want to be compensated for the weaker dollar,” Harris said, adding that he thinks the market’s moves have been overdone.

“While I’m skeptical of the whole thing in terms of whether it makes sense logically, this is the way the market behaves. It’s like a Pavlovian response. If the Fed looks soft, oil prices go up,” he said.

Still, Mr. Harris said that even allowing for some variations from seasonal fluctuations, the findings were grim.

“The employment report was quite bad. You could argue that some of this rise was a big fluke related to teenagers entering the labor market. But that’s only part of the story. Most of it seems to be real. The labor market is very weak,” he said.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came 1.48 billion shares compared with 1.15 billion traded Thursday.

The Russell 2000 index of smaller companies fell 22.90, or 3.00 percent, to 740.37.

Wall Street’s pullback weighed on Europe. Britain’s FTSE 100 ended down 1.48 percent, Germany’s DAX index fell 1.99 percent, and France’s CAC-40 lost 2.28 percent on the day. Japan’s Nikkei stock average closed up 1.03 percent; trading there ended before the release of the U.S. jobs report.