While North Korea is likely to remain in focus, a report on consumer price inflation may also attract attention on Friday, with consumer prices expected to rise by 0.2% in July.
"The level which we are looking at now is $1,300".
In other corporate results, a number of companies reported forecast-beating numbers. "The market is interpreting it as lowering the odds of the Fed raising rates in December", said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.
North Korea had responded to Trump's previous promise to unleash "fire and fury" with a threat to land missiles near the US Pacific territory of Guam.
The S&P 500 dropped the most since May and MSCI's gauge of stocks across the globe .miwd00000pus lost 1.1 percent in its third straight day of declines, as it pulled further back from all-time highs.
"There's not a great incentive to buy big", said Lerner of SunTrust Advisory. Amid this renewed flare-up in tensions with North Korea, Capital Economics made a decision to take a look at how the precious metal has responded to geopolitical risk events since 1985. The Dow slumped 204.69 points or 0.9% to 21,844.01, the Nasdaq plummeted 135.46 points or 2.1% to 6,216.87 and the S&P 500 tumbled 35.81 points or 1.5% to 2,438.21. Gold miners bucked the 1.3 per cent fall for Australia's benchmark index.
With Japanese markets closed for a public holiday, Hong Kong led the downward charge in Asia-Pacific as the Hang Seng lost more than two percent.
MARKETS OVERSEAS: In Europe, Germany's DAX was down 1 percent, while France's CAC 40 fell 1.4 percent.
"What we're seeing today is political tensions over North Korea and the United States. making people nervous", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.
In times of geopolitical crisis, the traditional safe haven assets for global investors are gold, U.S. dollars, U.S. Treasuries and Swiss francs, as these are very stable, internationally traded liquid assets.
The dollar index.DXY, which tracks the greenback against six rival currencies, was down 0.17 percent to 93.391.
Meanwhile, the USA dollar index has been surging since last Friday (August 4), when a better-than-expected USA jobs report boosted the greenback.
"Despite the threat from President Trump yesterday, markets are hoping that tensions will subside during coming weeks".
The Toronto Stock Exchange's S&P/TSX composite index closed down 143.08 points, or 0.94 per cent, at 15,074.25, its lowest close since July 7. The index had its biggest drop since mid-May a day earlier.
In terms of forex market movements, the U.S. currency lost significant ground relative to majors including the yen, sterling and the euro - most notably the latter one - as the news on inflation went public.