NEW YORK (AP) - Wall Street tumbled yesterday as oil prices rebounded, fanning concerns that inflation will further pinch consumers and lead central banks to raise interest rates. The Dow Jones industrial average fell more than 200 points to its lowest close since mid-March.

Investors are uneasy about oil prices, which yesterday traded as high as $138.30 a barrel on the New York Mercantile Exchange before settling up $5.07 at $136.38. Having breached $139 a barrel last week, record-high crude has increasingly posed both an inflationary risk and a threat to growth.

Energy Department data yesterday showed that gasoline supplies grew last week but that crude oil inventories fell more than analysts expected. The weekly report suggested no letup in US energy demand, even as consumers adjust their budgets to accommodate gasoline that averages more than $4 a gallon nationally.

The Federal Reserve's Beige Book, which provides readings on the US economy by region and arrives two weeks before the Fed's next meeting, indicated that Americans are straining under rising energy and food costs. The Fed said the economy remains "generally weak."

The findings seemed to confirm many of Wall Street's concerns.

"That certainly was not unexpected," said Janna Sampson, director of portfolio management at Oakbrook Investments. "Obviously, I don't know that the market likes hearing that, slowing spending or slowing growth and inflation at the same time."

According to preliminary calculations, the Dow fell 205.99, or 1.68 percent, to 12,083.77. It was the lowest close for the blue chips since March 17, when the Dow closed at 11,972.25.

The biggest loser among the 30 Dow components was Alcoa Inc., which fell $3.40, or eight percent, to $39.32 after a JPMorgan analyst said the aluminum producer is not planning to sell itself or spin-off part of its business.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 22.95, or 1.69 percent, to 1,335.49, and the Nasdaq composite index fell 54.93, or 2.24 percent, to 2,394.01.

Bond prices rose yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.08 percent from 4.11 percent late on Tuesday.

The dollar slipped against other major currencies, while gold prices rose.

Investors are worried that the spike in oil prices will dent consumer spending, which accounts for more than two-thirds of US economic activity and is crucial to some investors' hopes of seeing the US economy rebound from a slowdown in the second half of the year. However, the prospect of a sustained elevation of prices in oil and other commodities has dimmed some of those hopes.

"There are not a lot of positive things you can point to right now," said Michael Binger, portfolio manager at Thrivent Investment Management in Minneapolis. "We have commodity prices higher, inflation up, the prospect of the Fed raising interest rates instead of lowering, a worldwide slowdown and an economic slowdown in the US."

Binger noted that one weak spot since last fall on Wall Street - the financial sector - is now faced with a new worry of higher interest rates while still trying to navigate a tight credit market and fallout from bad bets on now-souring home loans.

"If the Fed starts to raise rates because of inflation not because the economy is good, that is not a positive on the financial stocks," he said.

Oakbrook's Ms. Sampson said her reading from the Beige Book was that there likely will not be another reduction in interest rates, but that she did not see anything dire enough to forecast a rate hike at the Fed's next meeting, because rising prices appear to still be "fairly well confined to commodities".

"Unless we get some kind of numbers between now and the meeting at the end of the month that tell you inflation is really out of control," Ms. Sampson said she expects any rate hike is further down the line.

In corporate news, Corporate Express NV, the Dutch office supplies distributor, accepted a sweetened $2.7 billion buyout bid from US office supplies retailer Staples Inc. Staples rose $1.23, or 5.3 percent, to $24.38.

Lehman Brothers Holdings Inc. fell for the fourth straight session. The company reported earlier this week that it lost more than $2.8 billion for the fiscal second quarter ended May 31 and announced plans to raise $6 billion in capital to help its balance sheet.

The stock declined $3.75, or 13.6 percent, to $23.75.

The Russell 2000 index of small companies fell 14.74, or 2.01 percent, to 717.88.

Declining issues outnumbered advancers by more than four-to-one on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.37 billion shares traded on Tuesday.

Overseas, Japan's Nikkei 225 average closed 1.16 percent higher. Britain's FTSE 100 index closed down 1.78 percent, Germany's DAX 30 index lost 1.78 percent, and the French CAC-40 index fell 2.1 percent.