QUERETARO, Mexico, Dec. 30 (UPI) -- The U.S. stock market is again wobbling as 2002 concludes. The Dow closed Monday 600 points or 7 percent down on its Nov. 27 close of 8,932. The threat of war and a rising oil price is the most cited reason for the weakness. But there is another one: the signs that the consumer is spending less readily and economic growth will disappoint.

For a number of months war with Iraq has been a possibility that has troubled financial markets. But in recent weeks the possibility has become probability. The United States and U.N. weapons inspectors have responded critically to the Iraqi weapons declaration. U.S. troops are gathering close to Iraq. It seems more and more likely that in January or February diplomatic channels will be abandoned and an invasion of Iraq will take place.

The oil market is observing these developments nervously. On the New York Mercantile Exchange, crude for February delivery traded over $33 per barrel Monday, its highest level for two years. A war in the Gulf would mean that oil supplies from the Middle East may be threatened. And supplies to the U.S. market are already being disrupted by unrest in Venezuela.

Venezuelan President Hugo Chavez is immensely unpopular with the bulk of the Venezuelan population and seems certain not to last out his presidential term. His opponents are seeking to force him to call a referendum on his rule, resign, or bring forward the end 2006 elections so that a constitutional means may be established of bringing the Chavez era to a close. A strike, now five weeks old, affecting Venezuela's oil production and exports is their main lever.

The United States imported about 1.6 million barrels per day in crude and petroleum products in October from Venezuela, about 18 percent of the 9 million barrels per day it normally imports from around the globe, according to Jim Williams, an oil market consultant and head of WTRG energy economics. Now the Venezuelan supply has been reduced virtually to nothing.

For Venezuela the loss of oil exports is crippling. But Chavez knows that to accede to his opponent's demands would be likely to end his career as president. He is therefore resolute. His handling of the strike that may eventually bring him down therefore mirrors his whole term: Chavez in power has been disastrous for the economy. The loss of Venezuelan supply could therefore persist for some time.

It is this lack of supply and the rise in U.S. oil prices to well over $30 per barrel that has led to some calls for the U.S. government to tap its strategic petroleum reserve. Dec. 23, Rep. Billy Tauzin, a Louisiana Republican and the head of the Energy and Commerce committee in the House of Representatives, asked the Bush administration to release crude oil from the SPR in order to bring down oil prices and help prevent harm to U.S. economic growth.

Meanwhile, since its mid-December meeting in Vienna the Organization of Petroleum Exporting Countries has sought to curb members' cheating on quotas and rein in crude supply. With this year's winter in the United States colder so far than the previous year and total inventories of petroleum (SPR and commercial) down, Williams thinks that from the market perspective "it's a bad time to fight a war in the Middle East." He sees no respite for oil prices unless some solution is found in Venezuela, while an attack on Iraq is certain to send the oil price up still higher, damaging growth in the United States and the West generally.

As spring is the time of year in which oil demand is weakest, it is possible that weak oil demand will cause an oil price collapse before the middle of 2003. But that depends on the outcome of any conflict. A protracted war or sabotage of oil production capacity in Saudi Arabia by supporters of Al Qaida or other anti-U.S. elements could keep the oil price up high for a long time and help to condemn the United States to recession.

Meanwhile, there are already signs of renewed weakness in the U.S. economy. Manufacturing growth remains barely positive. Holiday season sales have been weak. Wal-Mart, the world's biggest retailer, had to scale back its forecast for December sales growth to 3 percent from 3 percent to 5 percent. As some analysts had argued that competitively priced Wal-Mart tends to hold up well even in a weak economy, its disappointing sales performance is one of the clearest indications yet that consumption in the United States is starting, at last, to slow.

The dollar is taking that threat badly, falling against the euro in particular. The record trade deficit shows, however, that U.S. demand needs to weaken and that the dollar needs to fall. But for stock market investors these signs of slowdown are another negative.

And so we come back to the U.S. stock market. After the fast rally in October and November, stock prices have eroded. With the threat of war, high oil prices and signs of renewed economic weakness, it would seem folly to buy. Some heavy falls would seem likely in coming weeks. The 8,000 level on the Dow again seems likely to be broken. The dollar seems set to fall further and a euro worth $1.10 seems probable within the next two months.