STORY: South Korean stocks tumbled Wednesday morning after a night of political turmoil.

President Yoon Suk Yeol shocked the nation and sparked protests by declaring martial law to combat what he called "anti-state" forces.

He then reversed course just hours later in the face of opposition from lawmakers, but not before armed troops had smashed their way into parliament.

The country's benchmark Kospi stock index slid around 2% from the open following the drama.

It later steadied, but remained sharply lower in morning trade.

On currency markets, South Korea's won tumbled to two-year lows versus the dollar immediately after the martial law declaration.

By Wednesday morning it too had recovered a little, but remains among Asia's worst performing assets this year.

The country's finance ministry and central bank held emergency meetings overnight to discuss market support.

And the government said it was ready to deploy "unlimited" liquidity if needed.

Ministers said they would inject money into stocks, bonds and currency markets until trading normalized.

South Korea's financial regulator reportedly has a $7 billion stock market stabilization fund ready to go if required.

The political turmoil comes as Yoon and the opposition-controlled parliament clash over next year's budget.

They are deadlocked over control of spending plans.

Now the unrest has alarmed investors and politicians around the world, with Washington saying it was watching with "grave concern".