NEW YORK—Wall Street retreated Monday as continuing violence in the Middle East and a resulting jump in oil prices reminded investors that the market could face problems beyond the recession. The collapse of a Dow Chemical Co. joint venture, meanwhile, intensified Wall Street’s economic worries.

Investors remained cautious in a holiday-shortened week, unwilling to make many big bets in the final three days of trading for 2008. Israel’s escalating attacks against Gaza’s Hamas rulers made traders more hesitant to buy.

The tensions pushed oil prices above $40 a barrel duri...

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