By Jack Kim and Jonathan Thatcher
SEOUL (Reuters) - South Korea accused the reclusive North on Thursday of torpedoing one of its warships, heightening tensions in the region and drawing a warning from the United States that Pyongyang must face consequences.
Jittery South Korean financial markets and its currency fell as Seoul vowed to take "firm" measures against its neighbour, and Pyongyang, furiously denying the charge, warned it was ready for war if fresh sanctions were imposed.
The United States, which has some 28,000 troops stationed in the South following the 1950-53 Korean War, said it stood ready to help South Korea defend itself against any further "acts of aggression."
Amid international condemnation of North Korea, the impoverished country's only major ally, China, said it would make its own assessment of the South Korean investigation.
Mindful of the raised tensions on the Korean peninsula, U.S. Defence Secretary Robert Gates and spokesmen for the White House and the State Department chose their words carefully in their responses to the report.
"Clearly this was a serious provocation by North Korea and there will definitely be consequences because of what North Korea has done," said State Department spokesman P.J. Crowley.
Gates said the United States was consulting with South Korea, which would decide what action to take.
A report by investigators, including experts from the United States, Australia, Britain and Sweden, concluded that a North Korean submarine had fired the torpedo that sank the Cheonan corvette in March, killing 46 sailors.
Fear of escalating tension weighed on South Korean financial markets, already worried that investors jumpy about global financial concerns may pull out their money.
The South Korean won suffered its biggest daily fall against the dollar in 10 months. Stocks closed at their lowest level in almost three months.
U.N. Secretary-General Ban Ki-moon called result of the South Korean investigation deeply troubling.
The issue was not raised during a routine U.N. Security Council meeting on Thursday, envoys said. They suggested it could come before the council early next week if Seoul requested that the 15-nation body discuss it.
President Barack Obama's administration was consulting with South Korea's neighbours and the U.N. Security Council on what to do next, said White House spokesman Robert Gibbs.
He declined to answer reporters' questions on whether Seoul had assured Washington it would not retaliate militarily, or if Washington would support fresh sanctions against Pyongyang.
(Additional reporting by Rhee So-eui, Miyoung Kim, Christine Kim and Kim Yeon-hee in SEOUL, Chris Buckley in BEIJING, Paul Eckert, Matt Spetalnick, David Alexander in WASHINGTON, Patrick Worsnip in NEW YORK; Writing by Jonathan Thatcher and Ross Colvin; Editing by Chris Wilson)
