Hundreds of thousands of New Orleans residents have fled as Hurricane Katrina closes in on the city.
Highways were jammed as people obeyed Mayor Ray Nagin's order to leave the Louisiana city for higher ground.
Those unable or unwilling to leave spent the night in shelters - including the 77,000-seat Superdome stadium.
Although the storm has been downgraded from category five to four, sustained winds were still reaching 155mph (250km/h) as it made landfall.
Winds of up to 71mph (114km/h) have already been recorded in New Orleans, while Grand Isle - just off the coast - has seen gusts of 91mph (144km/h).
In the Gulf of Mexico, oil production has been hit, with capacity of over 650,000 barrels per day closed down, along with seven refineries and a huge offshore terminal.
In Asian trading on Monday, oil prices jumped nearly $5 a barrel to touch a high of $70.80.
'Once in a lifetime'
Issuing his unprecedented mandatory evacuation order, Mayor Nagin said the city - which sits some 6ft (2m) below sea level - was at risk of serious flooding.
The post-hurricane surge could reach 28ft (8.5m) toppling the barriers that protect the city and its historic French Quarter, he warned.
"We are facing the storm that most of us have feared," he told the city's 485,000 residents.
"This is a once in a lifetime event."
A series of barriers and pumps protect the bowl-shaped city from the Mississippi River on one side, and Lake Pontchartrain on the other.
Experts fear the city's defences could be overwhelmed by floodwaters, inundating New Orleans with chemicals from refineries, and human waste from damaged septic systems.
There was some hope though, as the storm approached, that the worst of the hurricane might not directly hit the city. Forecasters said the storm had turned slightly eastward, which would put the weaker side of the hurricane over New Orleans.
The BBC's Alistair Leithead in New Orleans says many people have headed to hotels in higher areas.
Businesses and homes have been boarded up and sandbags stacked up in doorways.
The most frail have been given priority in the Superdome stadium, the home of the NFL's New Orleans Saints and now a makeshift shelter.
States of emergency
The neighbouring states of Mississippi and Alabama are also braced for the storm.
US President George W Bush has issued a state of emergency in Louisiana and Mississippi, freeing the path for federal aid.
The storm, which formed in the Bahamas, lashed South Florida on Thursday, killing nine people, uprooting trees, downing power lines and causing extensive flooding.
Katrina is the sixth hurricane to hit the Florida coastline since last August.
If Katrina strengthens again, it could be only the fourth category five storm to hit the US since record-keeping began.
The last to strike the Louisiana area was Hurricane Camille in 1969, which killed more than 250 people.
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