South Korea worried about a possible expansion in financial market volatilities amid mounting geopolitical risks after the United Nations Security Council's new sanctions against the Democratic People's Republic of Korea (DPRK).

"We cannot rule out the possibility of growing volatilities in the financial market and escalating geopolitical risks on the Korean Peninsula if North Korea (DPRK) makes additional provocation and, as a result, major nations such as the US and Japan take strong sanctions," the Financial Services Commission ( FSC), South Korea's financial regulator, said in a statement on Friday.

The statement came after the UN Security Council toughened sanctions against the DPRK. The 15-member UN body unanimously approved newly expanded sanctions that dictate UN member states inspect DPRK ship and air cargo suspected of carrying banned materials and tighten scrutiny of DPRK officials and institutions engaged in illicit activities.

The DPRK said it would sever a military hotline with South Korea and nullify non-aggression agreements between the two countries, a response to the new sanctions. South Korean President Park Geun-hye vowed to "sternly deal with" any future provocation by the DPRK.

Tensions on the Korean Peninsula mounted after the DPRK's underground nuclear last month, a follow-up to the controversial December rocket launch largely seen as a disguised missile test.

The financial regulator warned that possibilities were raised for the DPRK to take further provocation as the UN sanctions were strengthened compared with the past, saying that it would more closely monitor risk factors that may arise from geopolitical risks.

Global financial markets showed stable picture, with the US Dow Jones Industrial Average setting new records for three straight days. The cost to hedge against losses on sovereign debt of South Korea, traded at 64 basis points, up 1 basis point from the previous session.