Fear index spikes on Greek woes

NEW YORK (CNNMoney.com) -- Wall Street's key index of volatility hit its highest level in more than two months Tuesday as worries about Greece's spreading debt crisis topped the already long list of investors' concerns.

The VIX (VIX), which gauges fear in the market, surged more than 18% to close at 23.84 on Tuesday.

That's the highest reading since the middle of February and up 53% since early April, when the VIX was trading at its lowest level in nearly three years.

Markets were rattled Tuesday as investors worried that the $146 billion aid package for Greece, announced over the weekend, would not prevent debt problems from spreading to other euro zone countries.

"When we finally did address the Greece situation, the market doesn't believe it or just thinks that there's another shoe about to drop," said Joseph Saluzzi, co-head of equity trading at Themis Trading.

Greece is a member of the so-called PIIGS, a collection of five debt-laden European nations. Many investors fear that Spain and Portugal could be two of the next countries to need financial assistance.

"This is not an isolated situation, because if it was just one country, the market would get over it," Saluzzi said. "It looks like we're now going to see the ramifications of this."

But it's not just concern over sovereign debt that's causing the VIX to surge, said Saluzzi.

"At this point there are just so many issues out there," he said. "You can pick anything, whether it's any country in Europe, the oil spill, volcanic ash or Goldman Sachs -- the market is having a hard time."

Given these lingering fears, Saluzzi said he wouldn't be surprised if the index continued to climb in the next few weeks, meaning stocks may be in for a rough ride.