* FTSEurofirst 300 down 0.5 percent after hitting 3-week low
* Korean shelling, Irish condition add to market jitters
* Banks, miners feature among top decliners
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By Atul Prakash
LONDON, Nov 23 (Reuters) - European shares hit their lowest in more than three weeks on Tuesday on reports that North Korea fired dozens of artillery shells at a South Korean island, with Ireland's financial and political turmoil adding to market woes.
The FTSEurofirst 300 index of top European shares fell for a third straight session and was down 0.5 percent at 1,088.26 points at 0923 GMT. The benchmark index is up just 4 percent this year after rising 26 percent in 2009.
Miners featured among the top losers, tracking a sharp decline in metals prices on tensions in the Korean peninsula. The STOXX Europe basic resources index fell 1.2 percent, while BHP Billiton, Antofagasta and Xstrata fell 1.3 to 2 percent.
Appetite for risky assets fell, with the VDAX-NEW volatility index rising 4 percent. The higher the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower the market's desire to take risk.
"There is a cocktail of concerns keeping investors occupied and Korea and Ireland are ahead in the list," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"Asia is very much seen as the growth region. The one thing the markets don't want to see is any sort of war going on in that region."
Seoul's military and media reports said artillery shelling by North Korea at the South Korean island set buildings on fire and prompted a return of fire by the South. A witness said that residents of the island had been evacuated.
"Given the current macro background, an escalation in tension in Korea is the last thing the market needs," a London-based trader said.
BANKS SLIDE
Financial stocks fell as investors stayed concerned about the situation in Ireland, which began two weeks of political manoeuvring as the government dares the opposition to block an austerity budget on which a multi-billion euro EU/IMF bailout is riding.
The STOXX Europe 600 banking index fell 1.4 percent, while Bank of Ireland slipped 17.7 percent, Allied Irish Banks fell 14 percent and Bankinter dropped 2 percent.
The markets are not convinced that aid to Ireland would prevent some other heavily indebted EU members from seeking help. Irish Prime Minister Brian Cowen defied mounting pressure to quit, saying he would stay in office until parliament passed the budget, then call an early election.
"There are a lot of concerns that we will see some spread of the problem. All eyes seem to have moved to Portugal. I can't see those nerves dissipating in the near term," Bowman said.
Across Europe, the FTSE 100, Germany's DAX, France's CAC 40 , Ireland's ISEQ, Spain's IBEX, Portugal's PSI 20 and Italy's FTSE MIB fell 0.1 to 1.8 percent. The Thomson Reuters Peripheral Eurozone Countries Index was down 0.7 percent.
France's Zodiac Aerospace fell 1.7 percent after it reported a 14 percent drop in full-year net profit and pledged to make further acquisitions after fending off a bid from Safran .
"Results are good, but nothing spectacular. The speculative froth has gone away and people continue to book profits. Bear in mind the stock was up some 85 percent on the year before Safran backtracked," a Paris-based trader said. (Additional reporting by Blaise Robinson in Paris; Editing by Jon Loades-Carter)