Traders work on the floor of the New York Stock Exchange. (Photo: Spencer Platt, Getty Images)

U.S. stocks tumbled Thursday and closed sharply lower on rising geopolitical risks sparked by a downed Malaysia Airlines jet and an Israeli offensive in the Gaza strip.

The drop sent the Dow back below 17,000 and snapped the blue chip index’s four-day winning streak that pushed it to record levels this week. It was the Dow’s worst one-day drop since May 15.

A few hours later, the Nikkei 225 index in Japan followed suit, plunging 1.3% at the open. As of 10 a.m. Japan time, the index is off 1.5%, a 225-point drop.

The news that a Malaysia Airlines passenger jet crashed in Ukraine near the Russian border — or was shot down (a scenario that took on more weight after the markets closed ) — caused a dip in the stock market, as investors reacted to fresh uncertainty in a volatile part of the world, says Gary Kaltbaum, president of money management firm Kaltbaum Capital Management.

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— USA TODAY (@USATODAY) July 17, 2014

Late in the trading day, the Israeli military announced a ground offensive in the Gaza Strip after 10 days of fighting between Israel and Hamas militants. Minutes before the closing bell, word was spread via Twitter that the White House was on lockdown, a security precaution over an unattended bag that turned out to be a false alarm .

Geopolitical risk often spooks markets. especially in the short term, as investors wait to gather more information and find out exactly what happened, he says.

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— John Waggoner (@JohnWaggoner) July 17, 2014

If true (and the plane was shot down), combined with the Israeli situation, there is potential for powderkegs, says Kaltbaum. And with the market in the trees (and trading near new highs), there is potential for profit taking. But news will be fluid. If all hell doesn’t break loose, the (decline) should be short-lived.

The big uncertainty, Kaltbaum adds, is what could happen next and who could get involved.

The Dow Jones industrial average fell 161.39 points, or 0.9%, to 16,976.81, after closing at a record 17,138.20 Wednesday. The Standard & Poor’s 500 index dropped 23.45, or 1.2% to 1958.12 and the Nasdaq composite index fell 62.52, or 1.4% to 4363.45.

Gold and bond prices rose as investors flocked to so-called safe havens. The yield on the 10-year Treasury note, which moves opposite to price, dropped to 2.45% from 2.53% Wednesday. Gold prices rose 1.5% to 1,319 an ounce.

Airline stocks fell on the crash news: American Airlines Group was down 4% to $41.70, Delta Air Lines dropped 3.43% to $36.57, United Continental shed 3.5% to $43.35.

A batch o f mixed earnings and economic reports also gave investors a reason to pull back. Russian stocks took a hit after the U.S. announced a new round of sanctions.

Government reports showed a mixed picture for the economy. While the number of people seeking U.S. unemployment benefits fell last week, home construction fell in June to the slowest pace in nine months, a setback to hopes that housing will boost economic growth.

In corporate news, Microsoft got a boost as shares of the tech giant jumped 1% to $44.53 after the company said it was cutting up to 18,000 jobs over the next year.

— USA TODAY Money (@USATODAYmoney) July 17, 2014

European stock markets were lower and losses accelerated at the end of the trading session after news of the plane crash. Britain’s FTSE 100 fell 0.7% to 6738.32 and the CAC-40 in France slipped 1.2% to 4316.12. Germany’s DAX dropped 1.1% to 9753.88.

In Asia, Tokyo’s Nikkei 225 index fell 0.1% to 15,370.26. Hong Kong’s Hang Seng was flat and China’s Shanghai Composite fell 0.6%.

Wall Street closed higher on Wednesday as the Dow rose 0.5% to 17,138.20, S&P 500 gained 0.4% to 1981.57 and the Nasdaq added 0.2% to 4425.97.

Contributing: The Associated Press

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— USA TODAY Money (@USATODAYmoney) July 17, 2014