The South Korean stock market's volatility soared to a yearly high on Friday as investors fret over the ripple effect of military tension with North Korea following an exchange of artillery fire across the western border.
  

The volatility index for the KOSPI 200, a basket of 200 blue-chip shares listed on the main Seoul bourse, jumped 23.3 percent to close at 18.49 on Friday, marking the highest level since Oct. 17, 2014, data by Yonhap Infomax, the financial news arm of Yonhap News Agency, showed.
  

The so-called "fear index" is an indicator of how much the futures market fluctuates based on investors' predictions for KOSPI 200 options using their prices, showing the overall volatility of the country's stock market. A higher number means that shares on the main bourse trade in a relatively wide range.
  

Although market watchers played down Thursday's border skirmish as a short-term risk factor, traders dumped shares soon after the market opening after North Korea threatened future military action if Seoul does not halt anti-Pyongyang propaganda broadcasts by Saturday afternoon.
  

On Friday, the benchmark index KOSPI dipped 2.01 percent to 1,876.07, touching a two-year low. The secondary KOSDAQ index sank 4.5 percent to 627.05, the lowest level since early March. 
  

The greater volatility was in line with the global trend as equities in advanced markets have fluctuated amid uncertainties over a potential U.S. interest rate hike and the slowdown in the Chinese economy.
  

The volatility index for the Chicago Board Options Exchange jumped 25.5 percent to 19.14 on Thursday, the highest since late January. (Yonhap)