* Oil prices rise on Bahrain violence
* Japan nuclear crisis escalates
* Indexes: Dow, S&P, Nasdaq all down 1.5 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to midday)
By Caroline Valetkevitch
NEW YORK, March 16 U.S. stocks sank for a third day on Wednesday as worries about Japan's nuclear crisis escalated, and analysts saw more volatility ahead for the market.
The S&P 500 fell more than 1 percent and was within a few points of turning negative for the year after the U.N. nuclear watchdog chief said the situation at a nuclear reactor in Japan damaged after a recent earthquake and tsunami was "very serious." For details, see [ID:nLDE72E24B] and [ID:nWEA9026]
The VIX market volatility index .VIX, Wall Street's fear gauge, jumped 15 percent, and the IShares MSCI Japan Index Fund (EWJ.P), which owns Japanese stocks, slid 4.1 percent to $9.62.
U.S. power company Exelon Corp (EXC.N) fell 3.2 percent to $40. The Japan nuclear crisis has created doubts about the prospects for the nuclear power industry.
"We are so fixated here on Japan, and this intraday volatility is without question here to stay as we are all quickly learning what nuclear power is. You can throw everything else out the window," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.
It was a third day of losses due to uncertainties arising from the crisis in Japan, the world's third-largest economy. Worries over the situation have sent investors to safer assets such as bonds. U.S. Treasury debt prices surged.
The Dow Jones industrial average .DJI tumbled 178.39 points, or 1.50 percent, at 11,677.03. The Standard & Poor's 500 Index .SPX slumped 19.17 points, or 1.50 percent, at 1,262.70. The Nasdaq Composite Index .IXIC was down 39.28 points, or 1.47 percent, at 2,628.05.
The S&P 500 is down 3 percent so far for the week, losing further ground in a rally that began in September.
The market has also been grappling with unrest in the Middle East and North Africa that has pushed oil prices to 2-1/2 year highs.
In the latest development, Bahrain, a neighbor of top oil exporter Saudi Arabia, has launched a crackdown on protesters. The political upheaval sent Brent crude up 2.2 percent to nearly $111 a barrel. [ID:nLDE72F02J]
"The market was due for a correction and (Japan's crisis) probably precipitated that. We think the market was getting toward the upper end of fair value. So we're not surprised to see a correction here," said Maris Ogg, president of Tower Bridge Advisors in West Conshohocken, Pennsylvania, which has about $1 billion in assets under management.
Rising radiation levels in Japan caused workers to withdraw briefly from a stricken nuclear power plant, and a helicopter was unable to drop water to cool the most troubled reactor. [ID:nL3E7EF450]
Nikkei dollar-denominated futures NKc1 were down 5 percent. (Reporting by Caroline Valetkevitch; additional reporting by Chuck Mikolajczak and Ryan Vlastelica; editing by Kenneth Barry and Jeffrey Benkoe)