Oil was a harsh reminder of the market's problems on Tuesday as investors headed back to their desks after the long weekend.
Crude buckled beneath $29 a barrel after the International Energy Agency warned global oil markets could "drown" in oversupply this year as Iran prepares to flood the marketplace with its own production.
Fears over how low crude oil can go, and how long it will stay there, fed a selloff in the energy sector on Tuesday which bled over onto broader markets.
"U.S. stocks are moving with the price of crude oil," Aaron Jett, vice president of global equity research at Bel Air Investment Advisors, told TheStreet. "Before we opened this morning... WTI rallied to $30. It has since fallen back below $29 and stocks followed suit."
Benchmark indexes managed to claw back into the green in the final minutes of trading with the S&P 500 up 0.18%, the Dow Jones Industrial Average adding 0.31%, and the Nasdaq down 0.27%.
The International Energy Agency warned commodities could fall even further this year as the market faces "enormous strain." In its first monthly report of the year, the energy watchdog said new supplies from countries such as Iran will leave the oil market with a surplus of 1.5 million barrels a day over the first half of the year.
The Iranian government ordered oil companies to ramp up production on Monday after sanctions were lifted over the weekend. Iran could add 500,000 barrels a day to its output, a significant increase from its current production of around 2.9 million barrels a day.