Stocks slumped more than 2 percent on Wednesday in a third day of selling resulting from Japan's crisis, and analysts saw further market volatility

ahead.

The S&P 500, down 3.1 percent for the week, and the Nasdaq composite indexes turned negative for the year after the chief of the U.N.'s nuclear watchdog said the situation at a damaged nuclear reactor in earthquake-stricken Japan was very serious.

The comments drove investors to seek safety in bonds.

In another headwind for equities in a different part of the globe, escalating violence in the Middle East caused Brent crude to climb 1.9 percent.

What we're seeing with oil is the greatest supply risk in years. What we're seeing in Japan is unlike anything we've seen before, said Phil Flynn, senior market analyst with PFG Best in Chicago.

Flynn said Wall Street's fear gauge could be headed back toward a significant marker.

Based on the events now, it isn't impossible that the VIX could get up to where it was at the height of the (financial) crisis. It could triple, he said.

The CBOE market volatility index <.VIX> jumped 15 percent and is up more than 40 percent this week. The IShares MSCI Japan Index Fund , which owns Japanese stocks, slid 4.1 percent to $9.62. The ETF is down 11 percent this week due to uncertainties from the crisis, which began after Friday's earthquake and tsunami.

The Dow Jones industrial average <.DJI> was down 280.34 points, or 2.36 percent, at 11,575.08. The Standard & Poor's 500 Index <.SPX> was down 30.56 points, or 2.38 percent, at 1,251.31. The Nasdaq Composite Index <.IXIC> was down 58.64 points, or 2.20 percent, at 2,608.69.

Rising radiation levels in Japan caused workers to withdraw briefly from a nuclear power plant and a helicopter was unable to drop water to cool the most troubled reactor. Nikkei dollar-denominated futures were down 5.2 percent.

Nuclear-related stocks slid on bets the crisis would cripple the industry's growth worldwide. Cameco Corp shed 9.1 percent to $29.55 and Shaw Group dropped 3.7 percent. The Global X Uranium ETF lost 6.1 percent.

We're not recommending any new purchases of uranium stocks, said Joshua Brown, vice president of investments at Fusion Analytics in New York. The growth picture there is night and day compared with last week.

U.S.-listed shares of Toyota Motor Co dropped 1.4 percent to $80.24 after the automaker said it would continue to halt operations at its 12 main Japanese assembly plants.

Both Apple Inc and International Business Machines Corp sank after both received analyst downgrades. Apple lost 3.8 percent to $332.38 and IBM was off 3.9 percent to $152.77.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

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