(new throughout, updates VIX reading at close)

By Doris Frankel

CHICAGO, March 14 (Reuters) - The Chicago Board Options Exchange Volatility Index .VIX, or VIX, closed above 30 on Friday as U.S. stocks tumbled after an emergency plan to secure financing for Bear Stearns Co Inc BSC.N heightened worries about problems in the credit market.

The VIX, Wall Street's main barometer of investor fear, finished a tumultuous week at 31.16, spiking up 14.18 percent, its best close since March 2003. The VIX hit an intraday high of 32.89, its highest level in seven weeks.

The sharp rise in the VIX, which measures projected stock market volatility conveyed by near-term Standard & Poor's option prices, was primarily related to news of a liquidity crisis at Bear Stearns and worries in the financial sector.

"The focus was clearly on Bear Stearns today and the investment bank's ongoing problems," said independent options trader Frederic Ruffy. "Concerns about the financial industry, particularly the brokerage firms, along with general worries about the economy drove the VIX higher."

U.S. stocks sank after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) and the Federal Reserve Bank of New York agreed to provide emergency financing to Bear Stearns after the investment bank said its cash position had deteriorated sharply.

The elevated volatility is expected to remain heading into next week due to number of events that could spark more market turmoil, including a Federal Reserve meeting on interest rates and the quarterly expiration of March options and futures and the quarterly results from Bear Stearns.

"Everyone is nervous going into the weekend knowing that Bear Stearns is due to report earnings on Monday," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Inc in Chicago.