South Korean stocks plummeted by more than 1.5 percent on Friday as investors shed risky assets on escalating tensions in the Middle East. The Korean won fell sharply against the US dollar.

The benchmark Korea Composite Stock Price Index dropped 42.84 points, or 1.63 percent, to close at 2,591.86, trimming some of the losses after falling more than 3 percent during the session.

Trade volume was high at 799 million shares worth 13.85 trillion won (US$10 billion), with losers outpacing gainers 629 to 238.

Foreigners bought a net 343.9 billion won, while individuals dumped a net 925.6 billion won. Institutions offloaded a net 655.7 billion won.

In the latest developments in the Israel-Iran conflict that began earlier this month, media outlets have reported that Israel conducted an attack on a target in Iran.

Investors also opted to offload local stocks amid speculation that the Federal Reserve might postpone early rate cuts. Some market watchers even suggest that the central bank might consider raising rates instead.

"The stock prices are reacting excessively, considering the factor does not go beyond expectations," said Han Ji-young, a researcher from Kiwoom Securities.

Shares lost ground across nearly all sectors, with top tech giant Samsung Electronics falling 2.51 percent to 77,600 won and No. 2 chipmaker SK hynix losing 4.94 percent to 173,300 won.

KB Financial decreased 0.47 percent to 63,700 won, and Shinhan Financial slid 1.91 percent to 41,750 won.

Pharmaceutical companies were also among the major losers, with Samsung Biologics plunging 1.14 percent to 781,000 won and Celltrion moving down 2.37 percent to 172,900 won.

Amid the geopolitical tension, South Korea's top air carrier Korean Air Lines dipped 1.46 percent to 20,250 won and Asiana Airlines plunged 2.59 percent to 10,740 won.

The local currency ended at 1,382.2 won against the greenback, down 9.3 won from the previous session's close. (Yonhap)