After markets were closed for three days, the response to violence in the oil-producing North African country was swift.

"The domino effect that is sweeping the Arab world is taking its toll on global financial markets," said Kimberly DuBord of Briefing.com.

"Risk assets are being sold off," she said, pointing to moves toward US Treasuries, the dollar and gold.

"Libya holds Africa's largest oil reserves and is OPEC's eighth largest producer. Production disruptions in Libya would have a significant impact on Europe -- its largest oil export market."

Airlines -- whose profits are highly sensitive to fuel price increases -- were among the major losers.

Shares in United Continental were down 6.4 percent, Delta Air Lines was down 6.2 percent and American Airlines were down 5.4 percent.

The Dow Jones Industrial Average fell 60.85 points (0.49 percent) to 12,332.75. The broad-based S&P 500 dropped 9.89 points (0.74 percent) to 1,333.12, and the tech-heavy Nasdaq was off 34.58 (1.22 percent) 2,799.37.

The bond market rose. The yield on the 10-year Treasury fell to 3.53 percent from 3.59 percent late Friday, while that on the 30-year Treasury decreased to 4.66 percent from 4.70 percent. Bond yields and prices move in opposite directions.