The benchmark Korea Composite Stock Price Index (Kospi) tumbled 57.01 points, or 1.89 percent, to close at 2,962.17 points, the lowest finish since March 10.
Trading volume was moderate at about 830 million shares worth some 15.1 trillion won ($12.7 billion), with losers outnumbering gainers 702 to 202.
Foreigners sold a net 624 billion won, while retail investors bought 356 billion won. Institutions purchased a net 235 billion won.
Local stocks got off to a weak start, falling below the 3,000-point threshold for the first time in about six months. The Korean stock market was closed Monday due to an extended holiday tied to the Oct. 3 National Foundation Day.
An impasse over the US debt ceiling raised investors' concerns that the US faces risks of a default and it may deal a blow to President Joe Biden's big spending plan. Energy prices stayed high, adding to the worries of a slowdown in global economic recovery.
The tech-heavy Nasdaq composite plunged 2.14 percent, with the S&P 500 losing 1.3 percent. The Dow Jones Industrial Average retreated 0.94 percent.
Failed debt payment by giant Chinese property developer Fantasia Holdings Group Co. also fanned anxiety, in addition to the ongoing default crisis involving another leading Chinese developer, Evergrande Group.
"Issues like the US debt ceiling and China Evergrande crisis, in addition to inflation concerns from supply bottleneck, are expected to linger for a while, generating uncertainties in the stock markets," Eugene Investment & Securities analyst Huh Jae-hwan said.
Most large caps closed lower in Seoul.
Top cap Samsung Electronics declined 1.37 percent to 72,200 won, and No. 2 chipmaker SK hynix fell 2.1 percent to 97,900 won.
Internet portal operator Naver moved down 3.01 percent to 370,500 won, and leading chemical firm LG Chem decreased 2.99 percent to 747,000 won.
Top automaker Hyundai Motor closed unchanged at 193,500 won, and rechargeable battery maker Samsung SDI dipped 3.82 percent to 680,000 won. Pharmaceutical giant Samsung Biologics tumbled 7.2 percent to 812,000 won.
The local currency closed at 1,188.7 won against the US dollar, unchanged from the previous session's close.
