The benchmark Korea Composite Stock Price Index (Kospi) retreated 49.64 points, or 1.62 percent, to close at 3,019.18 points.
Trading volume was moderate at about 845 million shares worth some 12.8 trillion won ($10.8 billion), with losers outnumbering gainers 779 to 125.
Foreigners sold a net 300 billion won, while retail investors bought 761 billion won. Institutions offloaded a net 487 billion won.
The key stock index slumped, following rallies by the US long-term Treasury yields, which fanned concerns the Federal Reserve might hurry to taper its stimulus to reign in the pace of inflation.
The Dow Jones Industrial Average retreated 1.59 percent, with the S&P 500 losing 1.19 percent. The tech-heavy Nasdaq composite decreased 0.44 percent.
Spiking coronavirus cases also raised worries about a slow economic recovery. The South Korean government said it will maintain tough social distancing rules for two more weeks across the nation, starting Monday.
Power shortages in China raised energy prices, adding to investors' worries.
"The steep increase in the energy commodities and supplies seem to have turned investors against taking risks, further pushing down the KOSPI," HI Investment & Securities analyst Park Sang-hyun said.
Top-cap Samsung Electronics declined 1.21 percent to 73,200 won, and No. 2 chipmaker SK hynix dropped 2.91 percent to 100,000 won.
Internet portal operator Naver moved down 1.55 percent to 382,000 won, and leading chemical firm LG Chem shed 0.77 percent to 770,000 won.
Top automaker Hyundai Motor lost 3.25 percent to 193,500 won, and rechargeable battery maker Samsung SDI fell 1.53 percent to 707,000 won. Pharmaceutical giant Samsung Biologis edged up 0.11 percent to 875,000 won.
The local currency closed at 1,188.7 won against the US dollar, down 4.7 won from the previous session's close. (Yonhap)