US STOCKS-Wall St tumbles on Ukraine-Russia tension; fear index surges

* Russian stock market, bonds and currency plunge

* Crude prices up more than 2 percent

* CBOE Volatility index VIX jumps more than 14 pct

* Dow down 1.1 pct; S&P 500 off 0.9 pct; Nasdaq off 0.9 pct

By Angela Moon

NEW YORK (Frankfurt: HX6.F - news) , March 3 (Reuters) - U.S. stocks sold off on Monday alongside other risky assets globally as Ukraine and Russia prepared for possible war after Russian President Vladimir Putin declared he had the right to invade his neighbor.

Ukraine mobilized for war on Sunday and Washington threatened to isolate Russia economically as Moscow's biggest confrontation with the West since the Cold War unfolded.

The S&P 500 had closed at a record high on Friday, and profit-taking was expected on Wall Street due to the political uncertainty. The index found some support when it fell to 1,840, but broke below it after the first attempt. The S&P 500 extended losses in early afternoon trading but then recovered slightly to hover near the support level.

"It's too early to tell whether this would be an buying opportunity because we need to see how this (tension between Ukraine and Russia) plays out. It depends on how far this escalates but I would suggest hedging before making any bets at this point," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab (Frankfurt: SWG.F - news) in Austin, Texas.

The CBOE Volatility index VIX jumped more than 14 percent to 16.01, its biggest one-day jump in a month. The VIX, which generally moves inversely to the S&P 500, is used as hedges against further market decline.

Russian stocks and bonds fell sharply and the central bank raised interest rates to defend the ruble. The MICEX index of Moscow stocks tumbled 10.8 percent and the dollar-denominated RTS stock index dropped 12 percent.

The market rout highlighted the damage the crisis could do to Russia's vulnerable economy, making it harder to balance the budget and potentially undermining business and public support for Putin.

In U.S. trading, the Market Vectors Russia ETF fell as much as 8.9 percent in heavy volume to a 4-1/2 year low of $22.16. It was last down 5.6 percent at $23.05.

But the Direxion Daily Russia Bear 3x ETF, a leveraged play on bad news in the fortunes of the nation's listed stocks, jumped 17 percent to $20.31.

Energy stocks could lose if relations between the United States and Russia deteriorate further.

"Anything that involves a boycott of Russian supplies, which are very significant, could impact the energy sector dramatically," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

"In situations like this, you see very quick reactions reverse as people understand the scenario and how things play out."

The Dow Jones industrial average fell 181.55 points or 1.11 percent, to 16,140.16, the S&P 500 lost 17.12 points or 0.92 percent, to 1,842.33 and the Nasdaq Composite dropped 38.93 points or 0.9 percent, to 4,269.188.

Brent and U.S. crude prices rose more than 2 percent each. The S&P energy sector index, which opened higher, was down 1 percent.

Gold prices hit a four-month high as investors sought safe-haven assets, boosting gold stocks. U.S.-traded AngloGold Ashanti (LSE: AGD.L - news) shares gained 2.5 percent to $18.01.

Though the focus will likely remain on Ukraine, the economic calendar was busy on Monday. U.S. factory activity rebounded from an eight-month low in February and consumer spending rose more than expected in January, suggesting the economy was regaining some strength after a recent slowdown.