Dow down and out; drops 395 points

A spike in oil prices by over $11 send US markets into a tailspin with the Dow recording its worst fall in a year.

The Dow Jones industrial lost 395 points, or 3.1%, its biggest one-day decline since February of 2007.

The broader Standard & Poor's 500 index lost 3.1%, while the Nasdaq lost 3%. The S&P and Nasdaq witnessed their biggest declines in four months.

Fears that the US economy is in recession seem to be getting confirmed with Unemployment rate rising to a 20-year-high to 5.5% in May from 5.0% in April.

Morgan Stanley had circulated a note that stated oil could hit $150 a barrel by July 4.