U.S. stocks were poised to end the biggest quarterly decline in two years on a down note on Thursday as worries about the continuing conflict in Ukraine and its inflationary effect on prices and the Federal Reserve persisted.

While optimism about a possible peace deal between Ukraine and Russia helped lift stocks earlier in the week, hopes quickly faded and Russia's President Vladimir Putin threatened on Thursday to halt contracts supplying Europe with a third of its gas unless they are paid in rubles as Ukraine prepared for more attacks.

The United States imposed new Russia-related sanctions, and U.S. President Joe Biden announced the largest release ever from the country's emergency oil reserve.

Stock prices have been sensitive to any signs of progress toward a deal to resolve Russia's invasion of Ukraine. Already-high U.S. inflation has intensified with surging commodity prices such as oil and metals since the war began.

As prices increase, the Fed becomes increasingly likely to become more aggressive in raising interest rates to combat inflation, potentially curbing economic growth.

Data on Thursday showed consumer prices barely rose in February as pricing pressures intensified, while personal consumption expenditures (PCE) excluding food and energy rose by 0.4%, in line with expectations.

"The PCE number came out today, which is the Fed's preferred number, and although that was right on target, it was higher than it was last month, and the sense is it is going to continue to go higher, therefore you are seeing some weakness," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

"That only solidifies (Fed Chair) Jay Powell and the Fed's position to be more aggressive so there are going to be multiple 50 basis point hikes."

The Dow Jones Industrial Average fell 230.5 points, or 0.65%, to 34,998.31, the S&P 500 lost 25.06 points, or 0.54%, to 4,577.39 and the Nasdaq Composite dropped 88.38 points, or 0.61%, to 14,353.90.

While the S&P was set for its worst quarter since the COVID-19 pandemic was in full swing in the United States in 2020, stocks have rebounded in March, notching a gain of nearly 5%.

Investors will look toward Friday's jobs report for more confirmation of labor market strength for insight on the possible path of monetary policy by the U.S. central bank.

Defensive sectors such as real estate and utilities were among the best performing sectors as they are viewed as strong plays in a rising rate environment.

Energy, easily the best performing sector so far this year with a gain of about 39%, slipped as oil prices dropped on Biden's announcement while OPEC+ stuck to its existing output deal. The gain put the sector on pace for its biggest quarterly climb on record.

Drugstore chain Walgreens Boots Alliance slumped 5.10% after the company kept its 2022 forecast for low-single digit earnings growth unchanged.

Declining issues outnumbered advancing ones on the NYSE by a 1-to-1 ratio; on Nasdaq, a 1.37-to-1 ratio favored decliners.

The S&P 500 posted 53 new 52-week highs and six new lows; the Nasdaq Composite recorded 53 new highs and 89 new lows.