South Korean Ship Sinks Near North Korean Border

A South Korean naval ship sunk near the North Korean border Friday, spooking investors and sending stocks lower after the Dow Jones Industrial Average appeared poised to break 11,000. The South Korean military said 58 of 104 sailors aboard the Cheonan (pictured) had been rescued, according to the Associated Press.

By early afternoon Friday, it was unclear if the ship had been attacked or suffered a mechanical failure.

"While details are sketchy, initial reports suggest that some South Korean naval ships had been involved in combat with an unidentified ship in the area immediately preceding the incident," STRATFOR, a geopolitical analysis firm said. "Other reports suggest that the ship was struck by a torpedo. Yet another indicates a stern explosion."

CNN has more details:

Yonhap News Agency quoted Navy officials saying Friday that a ship carrying 104 crew members sank off the Seoul-controlled island of Baengnyeong in a flashpoint maritime border area between the Koreas.

The 1,500-ton ship Cheonan went down at 9:45 p.m. Friday near the island, but the cause of the incident was not immediately known, the officials said.

A rescue operation was under way. There were no immediate reports of casualties, but some sort of explosion occurred in the rear of the ship, officials told Yonhap.

The South Korean government issued a statement saying the reason for the incident remains unclear, but it wasn't ruling out some sort of military engagement.

Yonhap quoted naval officials as saying a South Korean vessel fired at a ship toward the north later.

However, South Korean government officials said it isn't certain whether North Korea was involved in the incident. Yonhap said local residents reported hearing gunfire for about 10 minutes.

As a result of the incident, South Korean government officials held an emergency meeting of ministers handling security-related matters, officials told Yonhap.

Aides to South Korean President Lee Myung-bak said the first priority is rescuing crew members, and the Defense Ministry said 58 members of the crew have been saved.

South Korea's Korean Broadcasting System said Navy vessels and helicopters were rescuing crew members, some of whom reportedly jumped into the sea after the blast, the KBS report said.

The official said the Sockcho, another South Korean navy vessel patrolling nearby, fired at unidentified ships north of the area.

U.S. military officials told CNN a South Korean vessel sank.

North Korea has said recently it is bulking up its defenses in response to recent joint South Korean-S. JKorenews agency also quoted South Korean military officials saying North Korea conducted dozens of artillery firing drills Friday.

More details as they become available.