U.S. stocks fell for the third straight day on Monday as investors braced for a possible war between Russia and Ukraine and monitored for signs that the Federal Reserve might step up the pace of interest-rate increases.

After weeks in which the Ukraine conflict appeared to have little impact on Wall Street, U.S. stocks tumbled Friday after the White House warned that  Russia could invade its neighbor at any moment. On Monday, stock and bond markets reacted skittishly to headlines about Ukraine and the diplomatic efforts to resolve the conflict.

"The market has woken up to the risk there over the past week or so," said Jon Adams, a portfolio manager at BMO Global Asset Management. "The challenge is that it's very hard to assess the risks of a war between Russia and Ukraine, because it's such an unpredictable situation."

The $Dow Jones Industrial Average(.DJI.US)$ ended the day with a loss of 171.89 points, or 0.5%, to close at 34566.17. The Dow was down more than 400 points at its low for the day, before recouping some of its losses in the afternoon.

The $S&P 500 index(.SPX.US)$ declined 16.97, or 0.4%, to 4401.67. The broad market index has shed just over 4% during the past three trading sessions, its steepest three-day decline since October 2020. The technology-heavy $Nasdaq Composite Index(.IXIC.US)$ was little changed Monday, slipping 0.24, or less than 0.1%, to 13790.92.European markets bore the brunt of tensions over a possible ground war in Ukraine. The pan-continental Stoxx Europe 600 closed down 1.8%. The index pared some losses after Russian Foreign Minister Sergei Lavrov, speaking in a meeting with Russian President Vladimir Putin, suggested Moscow should continue talks with the U.S. and its allies.

Yields on government bonds were whipsawed by the fast-moving situation. After initially falling as investors reached for the safety of U.S. Treasurys, they bounced back on Mr. Lavrov's comments and climbed further on comments from hawkish Fed officials about the pace of interest-rate increases.

The yield on 10-year Treasury notes settled on Monday at 1.995%, up from 1.951% Friday. Bond yields and prices move in opposite directions.

Moscow has denied intending to invade Ukraine, but Russia's military buildup has quickened, with forces positioned on three sides of the country. The State Department said Monday that the U.S. is  closing its embassy in the Ukrainian capital of Kyiv and relocating operations to the city of Lviv, near the Polish border, citing an acceleration in the buildup of Russian forces.

Stocks have also been buffeted this year by the prospect of the Fed raising rates. The central bank is gearing up to increase borrowing costs to combat the highest rate of inflation in four decades, winding down the easy-money policies that have pushed riskier assets higher for much of the past two years.

St. Louis Fed President James Bullard told CNBC on Monday that the Fed should "front-load" its planned rate increases, warning that the central bank's credibility was on the line. Another top Fed official, Kansas City Fed President Esther George, said the central bank should consider selling bonds from its $9 trillion asset portfolio  to address high inflation.

Oil prices climbed to new multiyear highs on concerns that a war would curtail supplies of Russian crude amid a lack significant spare supplies. Front-month Brent oil futures advanced 2.2% to $96.48 a barrel, the highest settle for the global crude benchmark since 2014.

Prices for natural gas, of which Russia is the biggest exporter globally, rose on both sides of the Atlantic. In the U.S., benchmark gas prices jumped 6.4% to $4.195 per million British thermal units. In Europe, which depends on Russia for much of its gas -- a chunk of it flowing through Ukraine -- benchmark gas prices climbed 4.3%.

Prices for palladium -- a metal widely used in the auto industry and heavily produced in Russia -- gained nearly 7%.

Investors say the standoff over Ukraine is difficult to trade. If Moscow were to attack and the U.S. and its allies responded with sanctions, the hostilities could affect the world economy and markets in unpredictable ways.

One likely consequence, given Russia's position as a commodities superpower, would be higher energy prices, which could keep up the pressure on central banks to raise rates. At least in the short term, stocks and bond yields would likely decline as investors sought safe assets, investors and analysts say.

"We have the inflation story and then we have the Russian story," said Lars Skovgaard Andersen, senior investment strategist at Danske Bank Wealth Management. In the event of an invasion, "there will be some negative effect on markets, but I also think investors are incorporating this," he added.

Among individual U.S. stocks, $Splunk(SPLK.US)$ rallied $10.46 a share, or 9.1%, to $124.97 after The Wall Street Journal reported that $Cisco(CSCO.US)$ had made a takeover offer worth more than $20 billion for the software maker.

Vaccine-maker stocks fell as data showed the Omicron wave of Covid-19 receding and after U.S. health regulators said Friday they would delay a decision on authorizing a vaccine for children under 5 years. Shares of $Moderna(MRNA.US)$ tumbled $18.85, or 12%, to $142.47, making it the worst-performing stock in the S&P 500 on Monday. $Pfizer(PFE.US)$ shares declined 98 cents, or 1.9%, to $49.80, while U.S.-listed shares of its partner $BioNTech(BNTX.US)$ sank $16.42, or 9.6%, to $154.53.

Shares of airlines were hammered in Europe after reports that several were avoiding Ukraine's airspace. Budget carrier Wizz Air dropped 6.3%, while British Airways owner International Consolidated Airlines Group lost 5.6%.

In Asia, Japan's Nikkei 225 fell 2.2% and China's Shanghai Composite Index fell 1%.