NEW YORK (Reuters) - Wall Street's most watched gauge of investor anxiety jumped to a new eight-month high on Monday as U.S. stocks extended their selloff from last week on worries over the fallout from U.S. President Donald Trump's tariff policy.

The Cboe Volatility Index - an options-based gauge of investor anxiety - jumped as much as 14.82 points to 60.13, its highest since August 5. The index, dubbed Wall Street's 'fear gauge,' was last up 4.52 points at 49.83, after registering its highest closing level in five years on Friday.

The index rose as Wall Street's main equity indexes opened sharply lower, with the S&P 500 close to confirming it is in a bear market - a drop of 20% from a record high.

The benchmark index recovered ground to trade up 0.7% in choppy price action after CNBC reported White House officials were not aware of U.S. President Donald Trump considering a 90-day pause in tariffs for all countries except China.

"The tariff episode has definitely rocketed VIX into panic territory," Jim Carroll, portfolio manager at Ballast Rock Private Wealth, said.

"The big question now is when we recover and how quickly," he said.

The VIX logged a record jump in August as traders rushed to hedge against market volatility during a global selloff fueled by U.S. recession fears. The index went on to mark a record retreat, however, as investors were quick to return to strategies that bank on low stock volatility.

"Tariff resolution is likely to be protracted, so I don't think we see the rapid collapse of volatility that happened last August," Carroll said.

Still, the VIX's latest jump puts it at levels that in the past have marked a crescendo in selling that could at least result in a pause in the market's slide.

"Readings of this magnitude are not only historically rare, but they also often overlap near major capitulation points in market sell-offs," Adam Turnquist, chief technical strategist for LPL Financial, said in a note.

(Reporting by Saqib Iqbal Ahmed; Editing by Kevin Liffey)